PROSPECTUS dated 16 October 2014
ARGENTUM CAPITAL S.A.
(a public limited liability company (société anonyme) incorporated under the laws of Luxembourg, having its registered office at 51
Avenue J.-F. Kennedy, L-1855 Luxembourg and registered with the RCS under number B.182.715) (the “Company”)
acting in respect of Compartment GAP+ 2047 - 2048 November 2014
Issue of
Series 2014-61
Class A up to SEK 200,000,000 Secured Credit-Linked and Equity Index-Linked Notes due 2020 (the “Class A Notes”)
Class B up to SEK 200,000,000 Secured Credit-Linked and Equity-Linked Notes due 2020 (the “Class B Notes”)
This Prospectus has been approved by the Central Bank of Ireland (the “Central Bank”) as competent authority under the
Prospectus Directive 2003/71/EC (as amended by Directive 2010/73/EU) (the “Prospectus Directive”). The Central Bank only
approves this Prospectus as meeting the requirements imposed under Irish and EU law pursuant to the Prospectus Directive.
Application has been made to the Irish Stock Exchange plc (the “Irish Stock Exchange”) for the Class A Notes and the Class B
Notes (together, the “Notes”) to be admitted to the Official List of the Irish Stock Exchange (“Official List”) and trading on its
regulated market. Such market is a regulated market for the purposes of the Markets in Financial Instruments Directive 2004/39/EC.
Application has also been made for the Notes to be admitted to trading and listed on the regulated market of the NASDAQ OMX
Stockholm AB (the “Stockholm Stock Exchange”).
This document constitutes a Prospectus for the purposes of the Prospectus Directive.
This Prospectus is available on the Irish Stock Exchange’s website (www.ise.ie).
The Company is subject to the Luxembourg act dated 22 March 2004 on securitisation, as amended (the “Securitisation Act 2004”).
Under the Securitisation Act 2004, the Company, as a regulated entity within the meaning of the Securitisation Act 2004, is entitled
to issue securities to the public on an ongoing basis.
The Company acting in respect of Compartment GAP+ 2047 - 2048 November 2014 (the “Compartment”) created by the board of
directors of the Company (in such capacity, the “Issuer”) will issue the Notes relating to such Compartment. The Issuer’s liabilities
in respect of such Notes will be allocated to the Compartment and will be segregated from the Company’s other assets and liabilities
and from the assets and liabilities allocated to any other compartments created by the Company. The Mortgaged Property is in
principle exclusively available to satisfy the rights of the holders of the Notes and the rights of the creditors whose claims have arisen
as a result of the creation, the operation or the liquidation of the Compartment, as contemplated by the articles of association of the
Company (the “Articles”).
Claims of the Noteholders will be limited in recourse to the Mortgaged Property for the Notes which includes, among other things,
the rights of the Issuer under (a) the Credit Default Swap Transactions and (b) the Equity Swap Transactions, in each case, comprised
in the Swap Agreement, with the claims in respect of each Class of Notes ranking pari passu with one another (see “Risk Factors Limited recourse obligations” on page 24 of the Base Prospectus dated 23 December 2013, together with “Risk Factors”,
“Transaction Description” and “Questions and Answers” of this Prospectus).
Noteholders, by subscribing for the Notes, expressly accept, and shall be deemed to be bound by, the provisions of the Securitisation
Act 2004 and in particular, the provisions on limited recourse, no petition, subordination and priority of payments and deliveries.
The Class A Notes are credit-linked and equity index-linked. The Class B Notes are credit-linked and equity-linked. Whilst all Notes
are subject to the same credit-linked exposure, the Class A Notes are linked to the Equity Swap Transaction referencing the
performance of the Equity Index Basket and the Class B Notes are linked to the Equity Swap Transaction referencing the
performance of the Equity Basket. Certain risks relating to the Notes and an explanation as to the nature of such credit-linkage,
equity index-linkage and equity-linkage are set out below, in particular in the sections of this Prospectus entitled “Risk Factors”,
“Transaction Description” and “Questions and Answers”.
Any person (an “Investor”) intending to acquire or acquiring any securities from any person (an “Offeror”) should be aware that, in
the context of an offer of securities to the public as defined under the Prospectus Directive, the Issuer may be responsible to the
Investor for this Prospectus only if the Issuer is acting in association with that Offeror to make the offer to the Investor. Each Investor
should therefore verify with the Offeror whether or not the Offeror is acting in association with the Issuer. If the Offeror is not acting
in association with the Issuer, the Investor should check with the Offeror whether anyone is responsible for this Prospectus for the
purposes of Article 6 of the Prospectus Directive as implemented by the national legislation of each European Economic Area
Member State in the context of the offer to the public, and, if so, who that person is. If the Investor is in any doubt about whether it
can rely on this Prospectus and/or who is responsible for its contents it should take legal advice.
Each Class of Notes will be issued in registered form and will be represented by a Global Certificate as specified in the Issue Terms
of the Notes set out on page 99.
The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”)
or any state securities laws of any state or other jurisdiction of the United States, and the Issuer is not and will not be registered under
the United States Investment Company Act of 1940, as amended. The Notes may not be offered, sold or delivered within the United
States or to, or for the account or benefit of, any U.S. persons (as defined in Regulation S under the Securities Act) at any time.
The Notes have not been approved or disapproved by the United States Securities and Exchange Commission or any other securities
commission or other regulatory authority in the United States, nor have the foregoing authorities reviewed or passed upon the
accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offence in the United States.
This Prospectus contains references to credit ratings granted by Standard & Poor’s Credit Market Services Europe Limited (“S&P”),
Fitch Ratings Limited (“Fitch”) and Moody’s Investors Service Ltd (“Moody’s”). Each of S&P, Fitch and Moody’s are established
in the European Community and are registered in accordance with Regulation (EC) No 1060/2009 of the European Parliament and of
the Council of 16 September 2009 on credit rating agencies. A rating is not a recommendation to buy, sell or hold a security and may
be subject to revision or withdrawal at any time by the assigning rating agency. There can be no assurance that the assigning rating
agency will continue to monitor its rating during the life of the Notes or that such rating may not be downgraded or withdrawn.
The language of this Prospectus is English. Certain legislative references and technical terms have been cited in their original
language in order that the correct technical meaning may be ascribed to them under applicable law.
Any websites referred to in this document do not form part of this Prospectus.
Prospective investors should be aware of the risks involved in investing in the Notes (see the section of this Prospectus entitled “Risk
Factors”).
Dealer
CREDIT SUISSE INTERNATIONAL
The date of this Prospectus is 16 October 2014.
This Prospectus constitutes a Prospectus for the purposes of Article 5.3 of Directive 2003/71/EC (as
amended by Directive 2010/73/EU) (the “Prospectus Directive”).
This Prospectus has been prepared for the purpose of providing information with regard to the Issuer and the
Notes. The Issuer (the “Responsible Person”) accepts responsibility for the information contained in this
Prospectus. To the best of the knowledge and belief of the Issuer (having taken all reasonable care to ensure
that such is the case) the information contained in this Prospectus is in accordance with the facts and does
not omit anything likely to affect the import of such information.
The information in “Description of the Reference Entities”, Parts A-D, of this Prospectus has been extracted
from the base prospectuses of each of the Reference Entities (as defined below), save for the reference to the
exchange(s) on which such Reference Entity has certain securities listed which has been extracted from the
Bloomberg page for such Reference Entity. The Issuer confirms that this information has been accurately
reproduced, and as far as the Issuer is aware and is able to ascertain, no facts have been omitted which would
render the reproduced information inaccurate or misleading.
In addition, the Issuer accepts responsibility, in each Member State for which it has given its consent referred
to herein, for the content of this Prospectus in relation to any person (an “Investor”) to whom an offer of any
Notes is made by any financial intermediary to whom it has given its consent to use this Prospectus (an
“Authorised Offeror”), where the offer is made during the period for which that consent is given and where
the offer is made in the Member State for which that consent was given and is in compliance with all other
conditions attached to the giving of the consent, all as mentioned in this Prospectus. However, neither the
Issuer nor the Dealer has any responsibility for any of the actions of any Authorised Offeror, including
compliance by an Authorised Offeror with applicable conduct of business rules or other local regulatory
requirements or other securities law requirements in relation to such offer.
The Issuer consents to the use of this Prospectus in connection with the offer of the Notes during the period
commencing from, and including, 17 October 2014 to, and including, 20 November 2014 (the “Offer
Period”) by each of the following financial intermediaries in the Member State(s), and subject to the
conditions, set out against their names for so long as they are authorised to make such offers under the
Markets in Financial Instruments Directive (Directive 2004/39/EC):
Intermediary
Member State
Conditions
Garantum Fondkommission AB
Kingdom of Sweden
None
The Issuer may give consent to additional financial intermediaries after the date of this Prospectus and, if it
does so, it will publish the above information in relation to them at www.argentumcapital.lu at the relevant
time during the Offer Period.
An offer of the Notes may be made, subject to the conditions set out above, during the Offer Period by any
of the Issuer, the Dealer or any Authorised Offeror.
Other than as set out above, neither the Issuer nor the Dealer has authorised the making of any offer of the
Notes by any person in any circumstances and such person is not permitted to use this Prospectus in
connection with its offer of any Notes. Any such offers are not made on behalf of the Issuer or by the Dealer
or any Authorised Offerors and none of the Issuer or the Dealer or any Authorised Offerors has any
responsibility or liability for the actions of any person making such offers.
AN INVESTOR INTENDING TO ACQUIRE OR ACQUIRING ANY NOTES FROM AN
OFFEROR WILL DO SO, AND OFFERS AND SALES OF THE NOTES TO AN
INVESTOR BY AN OFFEROR WILL BE MADE IN ACCORDANCE WITH ANY TERMS
AND OTHER ARRANGEMENTS IN PLACE BETWEEN SUCH OFFEROR AND SUCH
INVESTOR INCLUDING AS TO PRICE, ALLOCATIONS AND SETTLEMENT
ARRANGEMENTS.
THE ISSUER WILL NOT BE A PARTY TO ANY SUCH
3
ARRANGEMENTS WITH INVESTORS (OTHER THAN THE DEALER) IN
CONNECTION WITH THE OFFER OR SALE OF THE NOTES AND, ACCORDINGLY,
THIS PROSPECTUS WILL NOT CONTAIN SUCH INFORMATION. THE INVESTOR
MUST LOOK TO THE OFFEROR AT THE TIME OF SUCH OFFER FOR THE
PROVISION OF SUCH INFORMATION. THE ISSUER HAS NO RESPONSIBILITY TO
AN INVESTOR IN RESPECT OF SUCH INFORMATION.
Neither the Trustee nor the Dealer has or will have separately verified the information contained herein.
Accordingly, no representation, warranty or undertaking, express or implied, is or will be made and no
responsibility or liability is or will be accepted by the Trustee or the Dealer as to the accuracy or
completeness of the information contained in this Prospectus or any other information provided by the Issuer
in connection with the Notes or their distribution.
No person is or has been authorised by the Issuer or the Trustee to give any information or to make any
representation not contained in or not consistent with this Prospectus or any other information supplied in
connection with the Notes and, if given or made, such information or representation must not be relied upon
as having been authorised by the Issuer, the Dealer or the Trustee.
Neither this Prospectus nor any other information supplied in connection with the Notes (a) is intended to
provide the basis of any credit or other evaluation or (b) should be considered as a recommendation by the
Issuer, the Dealer or the Trustee that any recipient of this Prospectus or any other information supplied in
connection with the Notes should purchase any Notes. Each investor contemplating purchasing any Notes
should make its own independent investigation of the financial condition and affairs, and its own appraisal of
the creditworthiness, of the Issuer, each Reference Entity and each issuer of constituent share within the
relevant Class Equity Basket. Neither this Prospectus nor any other information supplied in connection with
the Notes constitutes an offer or invitation by or on behalf of the Issuer, the Dealer or the Trustee to any
person to subscribe for or to purchase any Notes.
Neither the delivery of this Prospectus, nor the offering, sale or delivery of Notes shall in any circumstances
imply that the information contained herein concerning the Issuer is correct at any time subsequent to the
date hereof or that any other information supplied in connection with the Notes is correct as of any time
subsequent to the date indicated in the document containing the same. The Dealer and the Trustee expressly
do not undertake to review the financial condition or affairs of the Issuer during the life of the Notes or to
advise any investor in the Notes of any information coming to their attention.
This Prospectus does not constitute an offer to sell or the solicitation of an offer to buy any Notes in any
jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such jurisdiction. The
distribution of this Prospectus and the offer or sale of the Notes may be restricted by law in certain
jurisdictions. The Issuer, the Trustee and the Dealer do not and will not represent that this Prospectus may
be lawfully distributed, or that the Notes may be lawfully offered, in compliance with any applicable
registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder,
or assume any responsibility for facilitating any such distribution or offering. In particular, no action has
been or will be taken by the Issuer, the Trustee or the Dealer (save as specified in “Subscription and Sale –
Public Offer Selling Restriction under the Prospectus Directive” below) which is intended to permit a public
offering of the Notes or distribution of this Prospectus in any jurisdiction where action for that purpose is
required. Accordingly, the Notes may not be offered or sold, directly or indirectly, and neither this
Prospectus nor any advertisement or other offering material may be distributed or published in any
jurisdiction, except under circumstances that will result in compliance with any applicable laws and
regulations. Persons into whose possession this Prospectus or any Notes come must inform themselves
about, and observe any such restrictions. In particular, there are restrictions on the distribution of this
Prospectus and the offer or sale of Notes in the United States, the European Economic Area (including the
United Kingdom, Luxembourg, Ireland and the Kingdom of Sweden) and Switzerland (see the section
entitled “Subscription and Sale” on page 150 of the Base Prospectus and the section of this Prospectus
entitled “Subscription and Sale and Transfer Restrictions” below).
4
This Prospectus has been prepared on the basis that any offer of Notes in any Member State of the European
Economic Area which has implemented the Prospectus Directive (each a “Relevant Member State”) other
than offers (the “Permitted Public Offers”) which are made on or prior to 20 November 2014 and which are
contemplated in the Prospectus in the Kingdom of Sweden once the Prospectus has been approved by the
Central Bank in Ireland and published and notified to the relevant competent authority in accordance with
the Prospectus Directive as implemented in the Kingdom of Sweden will be made pursuant to an exemption
under the Prospectus Directive as implemented in that Relevant Member State from the requirement to
publish a prospectus for offers of Notes. Accordingly any person making or intending to make an offer in
that Relevant Member State of Notes which are the subject of the offering contemplated in this Prospectus
other than the Permitted Public Offers may only do so in circumstances in which no obligation arises for the
Issuer or the Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a
prospectus pursuant to Article 16 of the Prospectus Directive in each case, in relation to such offer. Neither
the Issuer nor the Dealer have authorised nor do they authorise, the making of any offer (other than
Permitted Public Offers) of Notes in circumstances in which an obligation arises for the Issuer or the Dealer
to publish or supplement a prospectus for such offer.
The Company has been established as a special purpose vehicle for the purpose of issuing asset backed
securities having adopted the form of a public limited liability company (société anonyme) incorporated
under the laws of the Grand Duchy of Luxembourg. The Company’s activities are subject to the
Securitisation Act 2004 and the Company is a regulated entity within the meaning of the Securitisation Act
2004. Copies of the Articles as at the date of this document have been lodged with the Luxembourg trade
and companies register (Registre de commerce et des sociétés, Luxembourg) (“RCS”) and the Company is
registered with the Luxembourg trade and companies register under number B.182.715.
The Articles are published in the Mémorial, Recueil des Sociétés et Associations (the “Mémorial”).
Under the Securitisation Act 2004, the Company, as a regulated entity within the meaning of the
Securitisation Act 2004, is entitled to issue securities or its shares to the public on an ongoing basis.
All references in this Prospectus to (i) “euro”, “EUR” and “€” are to the currency introduced at the start of
the third stage of European economic and monetary union pursuant to the Treaty establishing the European
Community, as amended, (ii) “SEK” are to Swedish Krona being the lawful currency of the Kingdom of
Sweden and (iii) “United States Dollar”, “USD” or “$” are to United States Dollar being the lawful
currency of the United States of America.
5
TABLE OF CONTENTS
SUMMARY.......................................................................................................................................................7
RISK FACTORS ............................................................................................................................................24
TRANSACTION DESCRIPTION................................................................................................................53
QUESTIONS AND ANSWERS ....................................................................................................................79
DOCUMENTS INCORPORATED BY REFERENCE ..............................................................................90
ISSUE TERMS ...............................................................................................................................................91
SCHEDULE 1 TO THE ISSUE TERMS – ADDITIONAL DEFINITIONS ..........................................108
SCHEDULE 2 TO THE ISSUE TERMS – AMENDMENTS TO MASTER CONDITIONS ..............111
SCHEDULE 3 TO THE ISSUE TERMS – PROVISIONS RELATING TO EUROCLEAR SWEDEN120
DESCRIPTION OF THE COMPANY AND THE COMPARTMENT ..................................................123
DESCRIPTION OF THE SWAP AGREEMENT.....................................................................................125
DESCRIPTION OF THE CREDIT DEFAULT SWAPS AND THE CREDIT EVENT PROVISIONS
RELATING TO THE CREDIT DEFAULT SWAP TRANSACTIONS AND THE NOTES ..129
DESCRIPTION OF THE EQUITY SWAPS.............................................................................................142
INDEX DISCLAIMERS ..............................................................................................................................151
DESCRIPTION OF CREDIT SUISSE INTERNATIONAL ...................................................................153
DESCRIPTION OF THE REFERENCE ENTITIES ...............................................................................154
DESCRIPTION OF THE REFERENCE OBLIGATIONS .....................................................................158
LUXEMBOURG TAXATION ....................................................................................................................159
SWEDISH TAXATION...............................................................................................................................162
IRISH TAXATION ......................................................................................................................................163
SUBSCRIPTION AND SALE AND TRANSFER RESTRICTIONS......................................................164
6
SUMMARY
Summaries are made up of disclosure requirements known as “Elements”. These Elements are
numbered in sections A – E (A.1 – E.7). This Summary contains all the Elements required to be
included in a summary for the Notes and the Issuer. Because some Elements are not required to be
addressed, there may be gaps in the numbering sequence of the Elements. Even though an Element
may be required to be inserted in this Summary because of the type of securities and issuers, it is
possible that no relevant information can be given regarding the Element. In this case a short
description of the Element is included in the Summary with the mention of “Not Applicable”.
This Summary relates to the Class A up to SEK 200,000,000 Secured Credit-Linked and Equity IndexLinked Notes due 2020 (the “Class A Notes”) and the Class B up to SEK 200,000,000 Secured CreditLinked and Equity-Linked Notes due 2020 (the “Class B Notes”, and together with the Class A Notes, the
“Notes”).
This Summary is qualified in its entirety by the remainder of this Prospectus.
A.1
Introduction and
Warnings
A.2
Consent to the use of the
prospectus, the offer period and
other conditions of use
This summary should be read as an introduction to this
prospectus (the “Prospectus”). Any decision to invest in the
Notes should be based on a consideration of this Prospectus as a
whole by the investor. Where a claim relating to the
information contained in this Prospectus is brought before a
court, the plaintiff investor might, under the national legislation
of the Member State, have to bear the costs of translating the
Prospectus before the legal proceedings are initiated. Civil
liability attaches only to those persons who have tabled the
summary including any translation thereof, but only if the
summary is misleading, inaccurate or inconsistent when read
together with the other parts of this Prospectus or it does not
provide, when read together with the other parts of this
Prospectus, key information in order to aid investors when
considering whether to invest in the Notes.
Argentum Capital S.A. (the “Company”), acting in respect of
Compartment GAP+ 2047 - 2048 November 2014 (the “Issuer”)
consents to the use of this Prospectus in connection with the offer of
the Notes during the period commencing from, and including, 17
October 2014 to, and including, 20 November 2014 (the “Offer
Period”) by each of the following financial intermediaries in the
Member State(s), and subject to the conditions, set out against their
names for so long as they are authorised to make such offers under
the Markets in Financial Instruments Directive (Directive
2004/39/EC):
Intermediary
Member State
Conditions
Garantum Fondkommission AB
Kingdom of
Sweden
None
7
The Issuer may give consent to additional financial intermediaries
after the date of this Prospectus and, if it does so, it will publish the
above information in relation to them at www.argentumcapital.lu at
the relevant time during the Offer Period.
An offer of the Notes may be made, subject to the conditions set out
above, during the Offer Period by any of the Issuer, the Dealer or
any Authorised Offeror.
Other than as set out above, neither the Issuer nor the Dealer has
authorised the making of any offer of the Notes by any person in
any circumstances and such person is not permitted to use this
Prospectus in connection with its offer of any Notes. Any such
offers are not made on behalf of the Issuer or by the Dealer or any
Authorised Offerors and none of the Issuer or the Dealer or any
Authorised Offerors has any responsibility or liability for the
actions of any person making such offers.
AN INVESTOR INTENDING TO ACQUIRE OR
ACQUIRING ANY NOTES FROM AN OFFEROR WILL DO
SO, AND OFFERS AND SALES OF THE NOTES TO AN
INVESTOR BY AN OFFEROR WILL BE MADE, IN
ACCORDANCE WITH ANY TERMS AND OTHER
ARRANGEMENTS IN PLACE BETWEEN SUCH OFFEROR
AND SUCH INVESTOR INCLUDING AS TO PRICE,
ALLOCATIONS AND SETTLEMENT ARRANGEMENTS.
THE ISSUER WILL NOT BE A PARTY TO ANY SUCH
ARRANGEMENTS WITH INVESTORS (OTHER THAN
THE DEALER) IN CONNECTION WITH THE OFFER OR
SALE OF THE NOTES AND, ACCORDINGLY, THIS
PROSPECTUS
WILL
NOT
CONTAIN
SUCH
INFORMATION. THE INVESTOR MUST LOOK TO THE
OFFEROR AT THE TIME OF SUCH OFFER FOR THE
PROVISION OF SUCH INFORMATION. THE ISSUER HAS
NO RESPONSIBILITY TO AN INVESTOR IN RESPECT OF
SUCH INFORMATION.
B.1
Legal and
name of the Issuer
commercial Argentum Capital S.A., acting in respect of Compartment GAP+
2047 - 2048 November 2014.
B.2
Domicile and legal form
of the Issuer, legislation under
which the Issuer operates and
country of incorporation of
Issuer
The Company has been established as a special purpose vehicle for
the purpose of issuing asset backed securities having adopted the
form of a public limited liability company (société anonyme)
incorporated under the laws of the Grand Duchy of Luxembourg.
B.16 Description of whether
the Issuer is directly or indirectly
owned or controlled and by
whom and nature of such control
The Company has 31,000 shares, all of which are fully paid and
held by Stichting Argentum. Stichting Argentum is a foundation
(stichting) incorporated under the laws of The Netherlands and is
not owned or controlled by any person.
Stichting Argentum has no beneficial interest in and derives no
benefit from its holding of the issued shares. It will apply any
income derived by it from the Company solely for charitable
purposes.
8
Stichting Argentum’s Deed of Incorporation (which includes its
articles of association) contains certain provisions ensuring
Stichting Argentum does not abuse its position of control, including
an express objects clause which stipulates that it exercises any and
all rights attached to the shares of the Company in such a manner as
to safeguard the interests of the Company and any and all persons
concerned to the best of the foundation’s ability, including in
relation to any of the voting rights to the shares in the Company and
to perform any and all acts that may be related, incidental or which
may be conductive to safeguarding such interests.
B.17
Issuer Ratings
Not applicable - no credit rating of the Issuer or the Notes has been
assigned.
B.20 Statement as to whether
the Issuer has been established
for the purpose of issuing asset
backed securities
The Company has been established in Luxembourg as a special
purpose vehicle for the purpose of issuing asset backed securities.
B.21 Company’s principal
business activities
The Company’s principal activities are to enter into, perform and
serve as a vehicle for, any securitisation transactions as permitted
under the Securitisation Act 2004.
Credit Suisse International is the Swap Counterparty under the
Swap Agreement, whose performance will affect the performance
of the Notes.
Credit Suisse International is also the Disposal Agent, Calculation
Agent, Valuation Agent, Dealer and Arranger; The Bank of New
York Mellon, London Branch is the Issuing and Paying Agent;
BNY Mellon Corporate Trustee Services Limited is the Trustee;
The Bank of New York Mellon (Luxembourg) S.A. is the
Custodian, Registrar and Transfer Agent; and Sanne Group
(Luxembourg) S.A. is the Corporate Services Provider in respect of
the Issuer (and together with Credit Suisse International, The Bank
of New York Mellon, London Branch, BNY Mellon Corporate
Trustee Services Limited and The Bank of New York Mellon
(Luxembourg) S.A., each such entity in each capacity is a
“Programme Party”).
Each Programme Party’s relationship with the Issuer is to act in its
respective capacity described above.
Skandinaviska Enskilda Banken AB (publ) is the Swedish Agent.
B.22 Statement that the
Company has not commenced
operations and no financial
statements have been made up as
at the date of the Prospectus
Not applicable – the Issuer has commenced operations and has
prepared financial statements.
B.23 Selected key historical
financial information about the
Company
Selected historical key financial information of the Issuer with
respect to the year ended 31 December 2013 (which has been
extracted from the Issuer’s audited financial statements which are
incorporated herein):
9
Total Assets:……………..………………………….€127,845
Total Liabilities:…………………………………… €127,845
Subscribed Capital:………………………………….€31,000
Total Charges……………….………………………..€96,932
Total Income……………….…………………………€96,932
B.24 Description of any
material adverse change since the
date of the Company’s last
published audited financial
statements
There has been no material adverse change in the prospects of the
Company since 31 December 2013, being the date of the
Company’s last audited financial statements.
B.25 Description of the
underlying assets
The assets securing the Notes comprise, among other things:
(A)
the rights of the Issuer under the equity swap transaction
relating to the Class A Notes (the “Class A Equity Swap
Transaction”) referencing a basket of indices of shares
(the “Equity Index Basket” and the “Class Equity
Basket” in respect of the Class A Notes);
(B)
the rights of the Issuer under the equity swap transaction
relating to the Class B Notes (the “Class B Equity Swap
Transaction”) referencing a basket of shares (the “Equity
Basket” and the “Class Equity Basket” in respect of the
Class B Notes); and
(C)
the rights of the Issuer under the credit default swap
transactions relating to each Class of Notes (the “Credit
Default Swap Transactions”).
The Class A Equity Swap Transaction and the Class B Equity Swap
Transaction (together, the “Equity Swap Transactions”) and the
Credit Default Swap Transactions are entered into with the Swap
Counterparty pursuant to an ISDA Master Agreement on the issue
date of the Notes along with a credit support annex entered into by
the same parties (the “Credit Support Annex”) under such ISDA
Master Agreement (such ISDA Master Agreement, together with
Equity Swap Transactions, the Credit Default Swap Transactions
and the Credit Support Annex, the “Swap Agreement”).
Under the Credit Support Annex, in respect of the Issuer’s exposure
to the Swap Counterparty under the Equity Swap Transactions and
the Credit Default Swap Transactions, the Swap Counterparty will
deliver to the Custodian cash in certain agreed currencies and/or
certain securities meeting criteria set out in the Credit Support
Annex (such cash and securities, “Eligible Cash” and “Eligible
Securities” respectively). For so long as the Custodian (on behalf
of the Issuer) is holding any Eligible Cash or Eligible Securities,
they shall also comprise underlying assets for the Notes. However,
the Issuer or the Trustee shall only be entitled to realise the value of
such Eligible Cash or Eligible Securities in limited circumstances
10
(being, in effect, where the Swap Counterparty is in default under
the Swap Agreement or otherwise insolvent).
Credit Suisse International, whose business is banking and financial
services and which is incorporated in England and Wales, is the
Swap Counterparty as at the Issue Date.
B.26 Parameters within which
an actively managed pool of
assets backing the issue is
managed
Not applicable - there is no actively managed pool of assets backing
the issue.
B.27 Statement regarding
fungible issues
The Issuer has agreed with each of the Dealer and the Distributor
that it will not issue further Class A Notes or Class B Notes to be
consolidated and form a single Class of Notes with such existing
Class of Notes. However, the Company may from time to time
issue new Notes on substantially similar terms as Series 2014-61.
B.28 Description of the
structure of the transaction
On 16 December 2014 (the “Issue Date”), the Dealer will in
consideration for the Notes procure that the Swap Counterparty will
enter into the Equity Swap Transactions and the Credit Default
Swap Transactions with the Issuer. In respect of each Equity Swap
Transaction, the Swap Counterparty will receive an amount equal to
5% to 25% of the Issue Price of the relevant Class. In respect of
each Credit Default Swap Transaction, the Swap Counterparty will
receive an amount equal to 75% to 95% of the Issue Price of the
relevant Class.
Principal
The Issuer is expected to fund payments of principal on each Class
of Notes out of (i) any final exchange amount receivable by the
Issuer under the Credit Default Swap Transaction relating to such
Class (being an amount equal to the then Outstanding Principal
Amount of such Class multiplied by the Fee Calculation Factor (a
variable percentage that corresponds to the redemption date of such
Class which is 100% on the Issue Date and will be reduced to
94.60% on the scheduled maturity date (and further reduced
thereafter)), (ii) any Credit Suisse Cash Settlement Amount (as
described below) receivable by the Issuer under such Credit Default
Swap Transaction, (iii) any additional exchange amount receivable
by the Issuer under such Credit Default Swap Transaction (being an
amount equal to the notional amount of the Reference Entity (the
“Reference Entity Notional Amount”, as specified or determined
in accordance with the terms of such Credit Default Swap
Transaction) in respect of which the relevant portion of such Credit
Default Swap remains unsettled as at the scheduled maturity date)
multiplied by the Fee Calculation Factor) and/or (iv) any Swap
Counterparty Equity Final Exchange Amount (as described below)
receivable by the Issuer under the Equity Swap Transaction relating
to such Class. The scheduled maturity date of each Class of Notes is
expected to be 30 December 2020, which may be extended due to
any postponement in the settlement of the Equity Swap Transaction
relating to such Class.
In respect of each Class of Notes, the aggregate of (i) the value
11
associated with the effective annual reduction in the relevant
notional amount under the Credit Default Swap Transaction and the
Equity Swap Transaction relating to such through the application of
the Fee Calculation Factor and (ii) the amount deducted in the
calculation of any Swap Counterparty Equity Final Exchange
Amount receivable by the Issuer under the Equity Swap
Transaction relating to such Class through the deduction of the
Performance Fee, represent the commissions payable to Garantum
Fondkommission (the “Distributor”). The commissions are
described in more detail in Element E.4 below.
Notwithstanding the above, the Dealer and the Distributor have
agreed that if any portion of the Notes is held by the Dealer and/or
any of its affiliates, the amount required to be paid to the
Distributor will be reduced by the proportion which such portion of
Notes held by the Dealer and/or its affiliates bears to all of the
outstanding Notes.
The amounts receivable by the Issuer under each Credit Default
Swap Transaction will be dependent on the performance of certain
obligations of certain specified entities (collectively the “Reference
Entities” and each a “Reference Entity”). The Reference Entities
are set out in the section of this Prospectus entitled “Description of
the Reference Entities”. None of the Distributor, the Issuer, the
Trustee, any Agent or the Swap Counterparty have any obligation
to monitor whether any credit event has occurred or may occur in
respect of a Reference Entity and/or any other developments in
respect of any of the Reference Entities (either prior to the Issue
Date or afterwards).
If a credit event occurs under each Credit Default Swap Transaction
in relation to a Reference Entity, subject to certain other
requirements being met, in partial redemption of each Note the
Swap Counterparty will be required to pay the Issuer a Credit
Suisse Cash Settlement Amount, being equal to the product of (i)
the Reference Entity Notional Amount of such Reference Entity (as
adjusted), (ii) the applicable Fee Calculation Factor, (iii) a
percentage determined under such Credit Default Swap Transaction
which is intended to reflect the post-credit event value of certain
debt obligations of the Reference Entity and (iv) a percentage
reflecting the portion of the Issue Price paid to the Swap
Counterparty under the Credit Default Swap Transaction relating to
such Class on the Issue Date, as described at the start of this
Element B.28.
Any final exchange amount receivable by the Issuer under the
Equity Swap Transaction relating to each Class of Notes will be
dependent on the performance of a basket of shares or indices of
shares, as applicable. Any such amount will be equal to the final
exchange amount payable by the Swap Counterparty to the Issuer
on the settlement of such Equity Swap Transaction (the “Swap
Counterparty Equity Final Exchange Amount”), which will be
determined by the Calculation Agent by reference to a formula.
B.29 Description of the flow of
funds and other material forms
The Swap Counterparty is Credit Suisse International, a company
incorporated in England and Wales, whose business is banking and
12
financial services.
of credit enhancement and
providers thereof
In relation to each Class of Notes, the Dealer will procure that the
Swap Counterparty enters into the Equity Swap Transaction and the
Credit Default Swap Transaction relating to such Class on the Issue
Date.
In relation to each Class of Notes, the Swap Counterparty Equity
Final Exchange Amount (if any) receivable by the Issuer under the
Equity Swap Transaction relating to such Class, is applied, together
with payment receivable by the Issuer from the Swap Counterparty
under the Credit Default Swap Transaction relating to such Class, to
make payments on the Notes of such Class.
B.30 The name and description
of the originators of the
securitised assets
C.1
Type
and
class
securities being offered
Credit Suisse International, a company incorporated in England and
Wales, whose business is banking and financial services.
of In respect of the Class A Notes:
Up to SEK 200,000,000 Secured Credit-Linked and Equity IndexLinked Notes due 2020
ISIN: XS1120892176
Common Code: 112089217
In respect of the Class B Notes:
Up to SEK 200,000,000 Secured Credit-Linked and Equity-Linked
Notes due 2020
ISIN: XS1120892416
Common Code: 112089241
C.2
Currency
The Notes will be denominated in Swedish Krona (“SEK”).
C.5
Description of restrictions Not applicable - the Notes will be freely transferable.
on free transferability of the
Notes
C.8
Rights attaching to and The Notes will have rights relating to, among other matters:
ranking of Notes
Status and Security
The Notes of each Class will represent secured, limited recourse
obligations of the Issuer, ranking pari passu amongst themselves. In
addition, the Notes of each Class will rank pari passu with the
Notes in respect of each other Class. Accordingly, following the
enforcement of the Security (as described below), the claims of
Noteholders of all Classes will be allocated to amounts received or
recovered in respect of the Mortgaged Property (as described
below) on a pari passu and pro rata basis, following the satisfaction
of the higher-ranking claims of the other Secured Creditors in
accordance with the priority of claims (as described below).
The Issuer will grant to the Trustee the following English law
13
governed security (the “English Law Security”) to secure its
obligations under the Notes and the Swap Agreement:
(i)
a first fixed charge over the Collateral (which is comprised
of any Eligible Cash and/or Eligible Securities delivered to
the Issuer by the Swap Counterparty from time to time and
held by the Custodian (on behalf of the Issuer)) and all
property, assets and sums derived therefrom (from time to
time);
(ii)
an assignment by way of security of all the Issuer’s rights,
title and interest attaching or relating to the Collateral
(which is comprised of any Eligible Cash and/or Eligible
Securities delivered to the Issuer by the Swap Counterparty
from time to time and held by the Custodian (on behalf of
the Issuer)) and all property, sums or assets derived
therefrom, including, without limitation, any right to
delivery thereof or to an equivalent number or nominal
value thereof which arises in connection with any such
assets being held in a clearing system or through a
financial intermediary;
(iii)
an assignment by way of security of the Issuer’s rights,
title and interest against the Custodian, to the extent that
they relate to the Collateral (which is comprised of any
Eligible Cash and/or Eligible Securities delivered to the
Issuer by the Swap Counterparty from time to time and
held by the Custodian (on behalf of the Issuer));
(iv)
an assignment by way of security of the Issuer’s rights,
title and interest under the Agency Agreement, to the
extent they relate to the Notes;
(v)
an assignment by way of security of the Issuer’s rights,
title and interest under the Swap Agreement (without
prejudice to, and after giving effect to, any contractual
netting provision contained in the Swap Agreement);
(vi)
an assignment by way of security of the Issuer’s rights,
title and interest under the Agency Agreement, to the
extent that they relate to any assets held by the Custodian
in respect of the Notes;
(vii)
an assignment by way of security of the Issuer’s rights
against the Disposal Agent under the terms of the Agency
Agreement (or any other agreement entered into between
the Issuer and the Disposal Agent) to the extent that such
rights relate to the Collateral (which is comprised of any
Eligible Cash and/or Eligible Securities delivered to the
Issuer by the Swap Counterparty from time to time and
held by the Custodian (on behalf of the Issuer));
(viii)
a first fixed charge over (A) all sums held by the Issuing
and Paying Agent and/or the Custodian to meet payments
due in respect of the Issuer’s secured payment obligations
and (B) any sums received by the Issuing and Paying
14
Agent under the Swap Agreement; and
(ix)
a first fixed charge over all property, sums and assets held
or received by the Disposal Agent relating to the
Transaction Documents and the Collateral (which is
comprised of any Eligible Cash and/or Eligible Securities
delivered to the Issuer by the Swap Counterparty from
time to time and held by the Custodian (on behalf of the
Issuer)),
the foregoing being the “Mortgaged Property”.
In addition, the Issuer will grant to the Trustee a Luxembourg law
governed security interest in the form of a pledge over the Pledged
Accounts (as defined in the Issue Deed) (the “Luxembourg Law
Security, and together with the English Law Security, the
“Security”).
Limited Recourse and Non-Petition
All payments to be made by the Issuer under the Notes and the
Swap Agreement will be made only from, and to the extent of the
sums received or recovered by or on behalf of the Issuer or the
Trustee in respect of the Mortgaged Property in accordance with the
order of priority outlined below. All deliveries and payments under
the Notes and the Swap Agreement will only be made from and to
the extent of the Mortgaged Property in accordance with such order
of priority.
Any shortfall shall be borne by the Noteholders of both Classes (on
a pari passu and pro rata basis) and such shortfall shall be so borne
by the Noteholders, together with the Swap Counterparty (in respect
of amounts owed to it) in the reverse of the order of priority
outlined below.
Furthermore, no party will be able to petition for the winding-up of
the Issuer as a consequence of any such shortfall or launch
proceedings against the Issuer which are based on article 98 of the
Luxembourg act dated 10 August 1915 on commercial companies,
as amended (“Luxembourg Companies Act 1915”).
Priority of Claims
Amounts received or recovered in respect of the Mortgaged
Property shall be applied in the following order of priority: (i)
amounts owing to the Swap Counterparty pursuant to the Credit
Support Annex (which shall be equal to the lesser of (A) the
Available Proceeds, (B) the value of the Swap Counterparty’s
Credit Support Balance and (C) the value of the amounts owing to
the Swap Counterparty under the Swap Agreement (which shall be
deemed to be zero if no such amounts are owing), (ii) the payment
or satisfaction of all taxes owing by the Issuer, (iii) the fees, costs,
charges, expenses and liabilities due and payable to the Trustee
including costs incurred in the enforcement of the Security
(including any taxes to be paid, legal fees and remuneration), (iv)
certain amounts owing to the Custodian, the Issuing and Paying
15
Agent, Registrar, Transfer Agent and the other Agents in respect of
reimbursement for sums paid by them in advance of receipt by them
of the funds to make such payment and fees, costs, charges,
expenses and liabilities, (v) any fees of the Disposal Agent, (vi) any
amounts owing to the Swap Counterparty under the Swap
Agreement (not already satisfied in accordance with (i) above), (vii)
fees of the Corporate Services Provider and (viii) amounts owing to
the Noteholders on a pari passu and pro rata basis.
Negative Pledge/Restrictions
There is no negative pledge. However, so long as any Note remains
outstanding, the Issuer will not, without the consent of the Trustee
and the Swap Counterparty engage in any business other than the
issuance or entry into of bonds, notes or other securities or the entry
into of loans or other agreements for the payment or repayment of
borrowed money, and provided always that such obligations are
secured on assets of the Issuer other than its share capital and those
assets securing any other obligations of the Issuer and that they are
entered into on a limited recourse and non-petition basis. In
addition, the Issuer will be subject to certain other restrictions
including that it will not, without the consent of the Trustee and the
Swap Counterparty, declare any dividends, have any subsidiaries or
employees, purchase, own, lease or otherwise acquire any real
property, consolidate or merge with any other person, convey or
transfer its properties or assets substantially as an entity to any
person (other than as contemplated by the Conditions) or issue any
further shares.
Events of Default
In respect of each Class of Notes, the conditions of the Notes (as
amended for the purposes of the Notes) contain the following
events of default (each an “Event of Default”):
(i)
default is made for more than 14 days in the payment of
any Instalment Amount in respect of such Class of Notes
or any of them, other than any Instalment Amount due and
payable on the Maturity Date;
(ii)
the Issuer does not perform or comply with any one or
more of its other obligations under such Class of Notes or
the Trust Deed which default is incapable of remedy or, if
in the opinion of the Trustee such default is capable of
remedy, is not in the opinion of the Trustee remedied
within 30 days after notice of such default shall have been
effectively given to the Issuer by the Trustee; or
(iii)
the occurrence of certain bankruptcy and insolvency
related events or proceedings.
Meetings
The conditions of the Notes will contain provisions for convening
meetings of (i) Noteholders of a Class to consider the relevant
matters solely affecting such Class and (ii) Noteholders of both
16
Classes to consider matters affecting their interests generally.
These provisions permit defined majorities to bind all holders,
including holders who did not attend and vote at the relevant
meeting and holders who voted in a manner contrary to the
majority.
Governing Law
English law, save that Articles 86 to 97 of the Luxembourg
Companies Act 1915 are excluded and the Luxembourg Law
Security shall be governed by Luxembourg law.
C.9
Interest and yield; name See C.8 above, plus:
of
representative
of
debt
Interest
Noteholders
None of the Notes bear interest.
Redemption
See Element B.28 for information regarding redemption.
Noteholder Facilitator
Garantum Fondkommission AB (or any successor entity thereto) is
the Noteholder Facilitator. However, the Noteholder Facilitator has
limited rights, limited to selecting replacement swap counterparties
and agents upon the occurrence of a Replacement Event in respect
of the Swap Agreement.
Garantum Fondkommission AB also acts as Distributor.
C.10 Explanation on how the Not applicable - the Notes do not bear interest.
interest amount is affected by
value of the underlying
C.11
Listing
Listing and Admission to Trading
Application has been made by the Issuer (or on its behalf) for the
Notes to be admitted to trading on the regulated market of the Irish
Stock Exchange and to be admitted to the Official List of the Irish
Stock Exchange on or about the Issue Date. Application has also
been made for the Notes to be admitted to trading and listed on the
regulated market of the NASDAQ OMX Stockholm AB.
Distribution
The Notes may be offered to the public in Sweden.
C.12
Minimum Denomination
D.2
Risks
Issuer
relating
to
The minimum denomination of each Class of Notes will be SEK
10,000.
the There are certain factors that are material for the purpose of
assessing the risks associated with the Issuer. In purchasing the
Notes of a Class, investors assume the risks associated with such
factors, which could materially adversely affect the Issuer and its
17
ability to make payments due under each Class of Notes. These
factors include the following:
Securitisation Act 2004 and Compartments: The Company is
established as a société anonyme (public limited liability company)
within the meaning of the Securitisation Act 2004, which means
that claims against the Company by the Noteholders will be limited
to the net proceeds of each Series of Notes and to the Collateral
relating to such Series included in the relevant Compartment.
The Issuer is a special purpose vehicle: The Issuer has, and will
have, no assets other than its issued and paid-up share capital, fees
(as agreed) payable to it in connection with the issue of each Class
of Notes or entry into other obligations from time to time and any
Mortgaged Property and any other assets on which the Series of
Notes or other obligations are secured.
Contracting on limited recourse basis: The rights of Noteholders
to participate in the assets of the Issuer is limited to the net proceeds
of each Class of Notes and to the Collateral relating to the Series of
Notes.
Allocation of Liabilities Among All Noteholders: Any liability
which is not a Series-specific liability (that is, it does not relate to
any Compartment in respect of which any Series of Notes is
issued), which is not otherwise funded, may be apportioned
between the Series.
Consequences of Winding-up Proceedings: The Company is
insolvency-remote, not insolvency-proof.
Fees and Expenses: Fees and expenses payable by the Issuer in
respect of each Class of Notes (including fees payable to the
Arranger and/or the Trustee) may rank senior to payments of
principal of each Class of Notes.
Possibility of U.S. withholding tax on payments: The application
of U.S. withholding tax to payments by the Issuer is not clear on the
date of this Prospectus.
Regulation of the Issuer by any regulatory authority: The Issuer
is not required to be licensed, registered or authorised under any
current securities, commodities, insurance or banking laws or
regulations of its jurisdiction of incorporation. However, any
requirement to be licensed or authorised could have an adverse
effect on the Issuer and on the Noteholders of each Class of Notes.
Anti-money laundering: The Issuer may be subject to anti-money
laundering legislation in its jurisdiction of incorporation.
D.3
Risks
Notes
relating
to
the There are also certain factors which are material for the purpose of
assessing the risks associated with each Class of Notes. These
include the following:
Limited recourse obligations: Each Class of Notes are direct,
secured, limited recourse obligations of the Issuer payable solely
18
out of the Mortgaged Property over which security is given by the
Issuer in favour of the Trustee on behalf of the Noteholders and
other Secured Creditors.
Security: Each Class of Notes will have the benefit of English lawgoverned security interests (and, in certain circumstances, security
interests governed by the laws of any other relevant jurisdiction)
which are granted to the Trustee over the Collateral allocated to the
Compartment.
Meetings of Noteholders and modification: The Conditions of the
Notes contain provisions for calling meetings of Noteholders to
consider matters affecting their interests generally (or Noteholders
of a Class to consider certain matters solely affecting such Class)
and permit defined majorities or the Trustee to bind all Noteholders
(or Noteholders of a Class).
Trustee indemnity and remuneration: The Trustee is not required
to give notice to the Issuer of its determination that, in respect of a
Class, an Event of Default has occurred or determine that an
Enforcement Event has occurred or enforce the security unless
directed by an Extraordinary Resolution passed by the Noteholders
of the relevant Class.
Priority of Claims: Following a liquidation or on an enforcement
of the security, the rights of the Noteholders to be paid amounts or
delivered assets due under each Class of Notes will be subordinated.
No gross-up: The Noteholders of a Class will not be entitled to
receive grossed-up amounts if any withholding tax or deduction for
tax is imposed on payments in respect of such Class of Notes.
Early Redemption: The amount payable to Noteholders of a Class
on an early redemption of such Class may be significantly lower
than their initial investment and may even be zero as a result of an
Early Redemption Event (for example following certain tax events
in respect of the Issuer).
Market Value of Notes: The market value of each Class of Notes
will be volatile.
Offer Period: The Issuer reserves the right to refrain from
commencing the offer of the Notes prior to the commencement of
the Offer Period or withdrawing the offer of each Class of Notes at
any time during the Offer Period.
Exposure to Credit Suisse International: Credit Suisse
International acts as the Swap Counterparty under the Swap
Agreement as well as Disposal Agent, Valuation Agent and
Calculation Agent and, as such, Noteholders are exposed to the
credit risk of Credit Suisse International in each of these capacities.
Nature of the Notes: Each Class of Notes are highly complex
investments that involve a high level of risk. Prospective investors
may lose their entire investment.
19
Equity Linkage through the Equity Swap Transactions: The
return to an investor on the Scheduled Maturity Date will, in part,
depend on the Equity Swap Transaction referencing the
performance of the relevant Class Equity Basket and which may be
affected by factors including:

the performance of the basket of shares or the basket of
indices of shares referenced in the relevant Class Equity
Basket;

the relative movements in the EUR/SEK or USD/SEK
foreign exchange rate; and

potential disruption events and/or adjustment in respect of
the relevant Equity Swap Transaction.
Credit Linkage through the Credit Default Swap Transactions:
Each Class of Notes is credit-linked as a result of the Credit Default
Swap Transaction relating to such Class of Notes and may be
affected by factors including:

credit risk in respect of the Reference Entities and the
Reference Obligations;

variation of the Reference Entities as the result of the
determination of one or more successor Reference Entities;

an extension of the Scheduled Maturity Date of each Class
of Notes as a result of Unsettled Credit Events;

conflicts of interest relating to Credit Suisse; and

factors influencing the risk of a Credit Event and the extent
of losses following the occurrence of a Credit Event.
The Credit Support Annex: There can be no assurance that any
amount realised from the Eligible Cash and/or sale of the Eligible
Securities delivered and held by the Issuer pursuant to the Credit
Support Annex will be equal to the amount otherwise payable by
the Swap Counterparty as a result of the termination of the Swap
Agreement.
Replacement of the Swap Counterparty: It is possible that the
identity of the Swap Counterparty will change, and accordingly, the
credit exposure of the Issuer and Noteholders to the Swap
Counterparty may also change.
Payments of Commissions to the Distributor: Commissions will
be paid to the Distributor during the life of the Notes.
Possibility of U.S. withholding tax on payments: The application
of U.S. withholding tax to payments by the Issuer is not clear on the
20
date of this Prospectus, which has consequential impact on
liquidity, credit, increased regulation and nationalisation and
systematic risk.
Recent Global Events: Since mid-2007, the global economy and
financial markets have experienced extreme levels of instability.
Foreign Exchange Risk: Noteholders shall be exposed to foreign
exchange risk of EUR and/or any other currency in respect of which
Eligible Cash and/or Eligible Securities are denominated in against
SEK.
No disclosure of information; disclosure of confidential
information: Each Class of Notes does not create any obligation on
the part of the Issuer or Credit Suisse International or any other
person to disclose to any Noteholder any such relationship or
information (whether or not confidential).
E.2b Reasons for offer and use
of proceeds when different from
making profit and/or hedging
certain risks
E.3
offer
In consideration for the issue of the Notes by the Issuer, the Dealer
will procure that the Swap Counterparty will enter into the Equity
Swap Transactions and the Credit Default Swap Transactions with
the Issuer.
Terms and conditions of Offer Period
Applications to subscribe for the Notes may be made during the
Offer Period (from 17 October 2014 to 20 November 2014), subject
to passporting of this Prospectus into Sweden.
Early Closing of the Subscription of the Notes
The Issuer reserves the right for any reason to close the Offer
Period early.
Any early closure of the Offer will be published on the Irish Stock
Exchange’s website (www.ise.ie).
Description of the application and settlement process
A prospective investor should contact the Distributor (Garantum
Fondkommission AB) during the Offer Period. A prospective
investor will acquire the Notes in accordance with the arrangements
existing between the Distributor and its customers relating to the
subscription of securities generally and not directly with the Issuer
or the Dealer.
Persons interested in purchasing Notes should contact their
financial adviser. If an investor in any jurisdiction other than
Sweden wishes to purchase Notes, such investor should (a) be
aware that sales in the relevant jurisdiction may not be permitted
due to selling restrictions and thus that the application may be
rejected by the Distributor; and (b) contact its financial adviser,
bank or financial intermediary for more information.
The Notes will be issued on the Issue Date against payment to the
Issuer of the net subscription moneys by debit of a cash amount on
21
or before the Issue Date or in accordance with other procedures
specified by the Distributor. Allotted Notes will be delivered to a
securities account of each Noteholder as soon as practicable after
the Issue Date.
Offer Price
In respect of each Class of Notes, the Issue Price in respect of such
Class plus a subscription fee of up to 2% of such Issue Price. Such
subscription fee shall be charged by and payable to the Distributor,
and, for the avoidance of doubt, shall not be payable by the Issuer
or the Swap Counterparty.
Conditions to which the offer is subject and results of the offer
Offers of the Notes are conditional on their issue. The Issuer will in
its sole discretion determine the final amount of Notes issued up to
a limit of (i) SEK 200,000,000 in respect of the Class A Notes and
(ii) SEK 200,000,000 in respect of the Class B Notes. Notes will be
allotted subject to availability in the order of receipt of investors’
applications. The final Aggregate Nominal Amount of the Notes
issued will be determined by the Issuer in light of prevailing market
conditions, and in its sole and absolute discretion depending on the
number of Notes which have been agreed to be purchased as of 20
November 2014. The precise Aggregate Nominal Amount of Notes
to be issued will be published on the Irish Stock Exchange’s
website (www.ise.ie) and filed with the Central Bank.
E.4
Interest material to issue The Dealer is entitled to annual commissions which are payable by
the Issuer. In order to satisfy the payment of these commissions, the
including conflicting interests
notional amount of each of the Credit Default Swap Transaction
and the Equity Swap Transaction in respect of each Class (and,
therefore, amounts due from the Swap Counterparty under each
swap transaction) is reduced by approximately 1% on an annual
basis. These reductions have the effect of reducing the obligations
of, and therefore releasing value to, the Swap Counterparty, which
value the Swap Counterparty will account for to the Dealer in
satisfaction of the Issuer’s obligations to pay the commissions.
These reductions are effected through the application of the Fee
Calculation Factor (described in paragraphs (a) and (b) below). The
Dealer is also entitled to a commission payable by the Issuer upon
payment by the Swap Counterparty of an amount equal to the
relevant Swap Counterparty Equity Final Exchange Amount under
each Equity Swap Transaction and which is satisfied by a deduction
of the Performance Fee in the calculation of such amount (as
described in paragraph (c) below). The Performance Fee in respect
a Class is equal to 10% of such amount by which the Swap
Counterparty Equity Final Exchange Amount (prior to the
deduction of such Performance Fee in its calculation) receivable by
the Issuer under the Equity Swap Transaction relating to that Class
exceeds 5.4% of the Aggregate Nominal Amount of such Class.
The Swap Counterparty will account to the Dealer for an amount
equal to any such Performance Fee in satisfaction of the Issuer’s
obligation to pay such additional commission.
The commissions will comprise such amounts generated by (a) the
22
application of the Fee Calculation Factor to the Class Notional
Amount or Reference Entity Notional Amount in the calculation of
any amounts receivable by the Issuer under each Credit Default
Swap Transaction, (b) the application of the Fee Calculation Factor
to the Swap Notional Amount in the calculation of any Swap
Counterparty Equity Final Exchange Amount receivable by the
Issuer in respect of each Equity Swap Transaction and (c) the
deduction of any Performance Fee in the calculation of any Swap
Counterparty Equity Final Exchange Amount (prior to the relevant
Additional Payout Amount being paid in respect of such Class)
which will ultimately depend, in part, on the Equity Swap
Transaction referencing the performance of the relevant Class
Equity Basket.
On each Annual Determination Date (being each of 30 December
2015, 30 December 2016, 30 December 2017, 30 December 2018,
30 December 2019 and 30 December 2020), in accordance with
paragraphs (a) and (b) above, the application of the Fee Calculation
Factor decreases the existing Class Notional Amount and/or
Reference Entity Notional Amount of each Credit Default Swap
Transaction and reduces any Additional Payout Amount that would
be payable under each Class of Notes. The amounts generated by
these reductions are accounted for to the Dealer in respect of
commissions payable by the Issuer, together with the Performance
Fee in (c) above, which is payable where the Swap Counterparty
Equity Final Exchange Amount (prior to the deduction of such
Performance Fee in its calculation) receivable by the Issuer under
the Equity Swap Transaction relating to that Class exceeds 5.4% of
the Aggregate Nominal Amount of the relevant Class and is equal
to 10% of any amount payable which is in excess of 5.4% of such
Aggregate Nominal Amount.
The Dealer will use each such commissions payable by the Issuer to
pay corresponding commissions to the Distributor. The
commissions payable to the Distributor that correspond to amounts
described in (a) above will be paid by the Dealer to the Distributor
in respect of the issue of the Notes on the fifth Business Day
following each Annual Determination Date (as described above).
The commissions described in (b) and (c) above are payable on the
scheduled maturity Date of the Notes or, if applicable, the relevant
Early Redemption Date of the Notes.
Notwithstanding the above, the Dealer and the Distributor have
agreed that if any portion of the Notes is held by the Dealer and/or
any of its affiliates, the amount required to be paid to the Distributor
will be reduced by the proportion which such portion of Notes held
by the Dealer and/or its affiliates bears to all of the outstanding
Notes.
E.7
Estimated
charged to investor
expenses Not applicable - there are no expenses charged to the investor by
the Issuer or an offeror.
23
RISK FACTORS
The purchase of the Notes may involve substantial risks and is suitable only for sophisticated purchasers
who have the knowledge and experience in financial and business matters necessary to enable them to
evaluate the risks and the merits of an investment in the Notes. The Issuer believes that the following factors
may affect either its ability to fulfil its obligations under the Notes or the performance of the Notes. Some of
these factors are contingencies which may or may not occur and the Issuer is not in a position to express a
view on the likelihood of any such contingency occurring. The Issuer believes that the factors described
below, together with the risk factors set out in the Base Prospectus, represent the principal risks inherent in
investing in the Notes, but the inability of the Issuer to pay principal (including any Additional Payout
Amount) or other amounts on or in connection with the Notes may occur for other reasons and the Issuer
does not represent that the statements below regarding the risks of holding any Notes are exhaustive.
Prospective investors should also read the Base Prospectus (including the section entitled “Risk Factors” on
page 17 thereof) and the detailed information set out elsewhere in this Prospectus, including, without
limitation:
(a)
the section entitled “Transaction Description”;
(b)
the section entitled “Questions and Answers”;
(c)
the section entitled “Description of the Company and the Compartment”;
(d)
the section entitled “Description of the Swap Agreement”;
(e)
the section entitled “Description of the Credit Default Swaps and the Credit Event Provisions
relating to the Credit Default Swap Transactions and the Notes”;
(f)
the section entitled “Description of the Equity Swaps”;
(g)
the section entitled “Description of the Reference Entities”; and
(h)
the section entitled “Description of the Reference Obligations”,
and, in the light of their own financial circumstances and investment objectives, reach their own views prior
to making any investment decision.
Prospective investors must note that the potential return on the Notes is not expected to be the same across
the Classes for the reasons outlined in more detail below and in the other sections of this Prospectus.
Offer Period
The Issuer reserves the right to refrain from commencing the offer of the Notes prior to the commencement
of the Offer Period or withdrawing the offer of the Notes at any time during the Offer Period. If the offer of
such Notes is withdrawn, such offer will be null and void. In such case, any amounts paid by an investor to
the Distributor in relation to the purchase of any Notes will be returned to such investor by the Distributor
but, depending on the agreement(s) in place between the investor and the Distributor and/or the Distributor’s
distribution policies, interest may or may not accrue on such amounts. There may also be a time lag between
the cancellation or withdrawal of the offer as applicable, and the return of any such amounts and, unless
otherwise agreed with, and paid by, the Distributor, no amount will be payable to investors as compensation
in respect thereof and investors may be subject to reinvestment risk.
In addition, the Issuer may close the offer of Notes early, whether or not subscriptions have reached the
maximum size of the offer, by immediately suspending the acceptance of further subscription requests and
24
by giving notice thereof. In such circumstances, the early closing of the offer will have an impact on the
aggregate amount of the Notes issued and therefore may have an effect on the liquidity of the Notes.
Furthermore, in certain circumstances, the Issuer may have the right to postpone the originally designated
issue date of the Notes. In the event that the issue date is so delayed, no compensation or other amount in
respect of interest shall accrue and be payable in relation to the Notes, unless otherwise agreed with the
Distributor and/or specified in its distribution policies, and paid by the Distributor. Investors will have the
right, within a prescribed time period, to withdraw their acceptance of the offer as a result of such
postponement.
Exposure to Credit Suisse International
Even though the Notes are not issued by Credit Suisse International, Credit Suisse International acts as the
Swap Counterparty under the Swap Agreement as well as Disposal Agent, Valuation Agent and Calculation
Agent. Exposure of Noteholders to Credit Suisse International in each of these capacities is described below
and elsewhere in this Prospectus.
It is important that prospective investors are aware of the extent of the aggregate exposure to Credit Suisse
International.
In the event of the insolvency of Credit Suisse International, the value of the Notes would drop significantly
and an investor may lose some or, potentially, all of their investment in the Notes. In addition, in such
circumstances, unless a replacement Swap Counterparty was appointed within 30 calendar days of any such
occurrence, as described in more detail below (and in respect of which no assurance can be given), the Swap
Agreement would terminate and the Notes would be subject to early redemption.
As Credit Suisse International is also the Disposal Agent, an insolvency of Credit Suisse International would
be likely to cause a significant delay in the sale of any Eligible Securities delivered to the Issuer under the
Credit Support Annex (which may only be so sold in connection with an early redemption of the Notes as a
result of a termination of the Swap Agreement occurring as a result of the occurrence of an Event of Default
in respect of the Swap Counterparty thereunder) and therefore also a significant delay in the redemption of
the Notes. Such delays may potentially last for months or years and investors may never recover their
investment in whole or at all.
More generally, Credit Suisse International may be subject to certain other conflicts of interest in connection
with its roles under the Notes as described in more detail below.
Risks relating to the business of Credit Suisse International as Swap Counterparty and other capacities in
respect of the Notes
Certain risks, including those described below, may impact the ability of Credit Suisse International to
execute its strategy and affects its business activities, financial condition, results of operations and prospects.
Because the business of a broad-based international financial services firm such as Credit Suisse
International is inherently exposed to risks that become apparent only with the benefit of hindsight, risks of
which it is not presently aware or which it currently does not consider material could also impact its ability
to execute its strategy and affect its business activities. The sequence in the risk factors presented below is
not indicative of their likelihood of occurrence or the potential magnitude of their financial consequences.
Regulatory and legislative changes may adversely affect Credit Suisse International’s business
Fundamental changes in the laws and regulations affecting financial institutions could have a material and
adverse effect on Credit Suisse International’s business. In the wake of the 2007-2009 financial crisis and the
continuing instability in global financial markets, regulators and legislators have proposed, have adopted or
are actively considering, a wide range of changes to these laws and regulations. These measures are
25
generally designed to address the perceived causes of the crisis and to limit the systemic risks posed by
major financial institutions.
A number of measures have been adopted and will be implemented over the next several years; some are
subject to legislative action or to further rulemaking by regulatory authorities before final implementation.
As a result, there is a high level of uncertainty regarding a number of the measures, including whether (or the
form in which) they will be adopted, the timing and content of implementing regulations and interpretations
and/or the dates of their effectiveness.
Notwithstanding attempts by regulators to co-ordinate their efforts, the measures adopted or proposed differ
significantly across the major jurisdictions, making it increasingly difficult to manage a global institution.
The absence of a co-ordinated approach, moreover, disadvantages institutions headquartered in jurisdictions
that impose relatively more stringent standards. The United Kingdom has adopted capital and liquidity
requirements for its major international banks that are some of the strictest among the major financial centres.
This could disadvantage financial institutions incorporated in England and Wales such as Credit Suisse
International when they compete with peer financial institutions subject to more lenient regulation or with
unregulated non-bank competitors.
The planned and potential regulatory and legislative developments in the United Kingdom and in other
jurisdictions in which Credit Suisse International has operations may have a material adverse effect on its
business, on the profitability or viability of certain business lines globally or in particular locations, and in
some cases on its ability to compete with other financial institutions. They are likely to be costly to
implement and could also have a negative impact on Credit Suisse International’s legal structure or business
model. Finally, the uncertainty related to or the implementation of legislative and regulatory changes may
have a negative impact on Credit Suisse International’s relationships with clients and its success in attracting
client business.
Performance in the financial services industry is affected by market conditions and the macro-economic
climate
The financial services industry prospers in conditions of economic growth; stable geopolitical conditions;
transparent, liquid and buoyant capital markets and positive investor sentiment. An economic downturn,
continued low interest rates or a severe financial crisis can negatively affect Credit Suisse International’s
revenues and ultimately its capital base.
A market downturn and weak macro-economic conditions can be precipitated by a number of factors,
including geopolitical events, changes in monetary or fiscal policy, trade imbalances, natural disasters,
pandemics, civil unrest, war or terrorism. Because financial markets are global and highly interconnected,
even local and regional events can have widespread impacts well beyond the countries in which they occur.
A crisis could develop, regionally or globally, as a result of disruptions in emerging markets as well as
developed markets that are susceptible to macro-economic and political developments, or as a result of the
failure of a major market participant. Credit Suisse International has material exposures to a number of these
markets. Moreover, its strategic plans depend more heavily upon its ability to generate growth and revenue
in the emerging markets, causing it to be more exposed to risks associated with them. The unresolved
Eurozone and US fiscal issues demonstrate that macro-economic and political developments can have
unpredictable and destabilising effects. Adverse developments of these kinds have affected Credit Suisse’s
businesses in a number of ways and may continue to have further adverse effects on its businesses.
Because Credit Suisse International has very substantial exposures to other major financial institutions, the
failure of one or more of such institutions could have a material effect on it.
Operational risk may increase costs and impact revenues of Credit Suisse International
All of Credit Suisse International’s businesses are dependent on its ability to process a large number of
complex transactions across multiple and diverse markets in different currencies, to comply with the
26
requirements of many different legal and regulatory regimes to which it is subject and to prevent, or
promptly detect and stop, unauthorised, fictitious and fraudulent transactions. Credit Suisse International’s
operational risk management and control systems and processes are designed to help ensure that the risks
associated with its activities, including those arising from process error, failed execution, fraud, systems
failure, cyber-attacks, breaches of information security and failure of security and physical protection, are
appropriately controlled. Although Credit Suisse International is continuously adapting its capability to
detect and respond to these risks, if Credit Suisse International’s internal controls fail or prove ineffective in
identifying and remedying such risks, it could suffer operational failures that might result in material losses.
In addition, despite the contingency plans Credit Suisse International has in place, its ability to conduct
business may be adversely affected by a disruption in the infrastructure that supports its businesses and the
communities in which it is located. This may include a disruption due to natural disasters, pandemics, civil
unrest, war or terrorism and involve electrical, communications, transportation or other services used by it or
third parties with whom it conducts business.
Credit Suisse International might be unable to identify or capture revenue or competitive opportunities, or
retain and attract qualified employees
The financial services industry is characterised by intense competition, continuous innovation, detailed (and
sometimes fragmented) regulation and ongoing consolidation. Credit Suisse International faces competition
at the level of local markets and individual business lines, and from global financial institutions that are
comparable to Credit Suisse International in their size and breadth. Barriers to entry in individual markets
and pricing levels are being eroded by new technology. Credit Suisse International expects these trends to
continue and competition to increase.
Credit Suisse International’s competitive strength and market position could be eroded if it is unable to
identify market trends and developments, does not respond to them by devising and implementing adequate
business strategies, adequately developing or updating its technology (particularly in trading businesses), or
is unable to attract or retain the qualified people needed to carry them out.
Material legal and regulatory risks arise in the conduct of Credit Suisse International’s business
The nature of Credit Suisse International’s business subjects it to significant regulatory oversight and
liability risk. Credit Suisse International is subject to many different legal, tax and regulatory regimes. Credit
Suisse International is involved in a variety of claims, disputes, legal proceedings and government
investigations in jurisdictions where it is active. These proceedings expose it to substantial monetary
damages and legal defence costs, injunctive relief and criminal and civil penalties, in addition to potential
regulatory restrictions on its businesses. The outcome of most of these matters, and their potential effect on
Credit Suisse International’s future business or financial results, is extremely difficult to predict. Considering
Credit Suisse International’s overall exposures and the current regulatory and political climate affecting
financial institutions, it expects charges associated with legal, regulatory and similar matters to remain at
elevated levels at least through 2014.
A further summary of economic, regulatory and other issues relevant to Credit Suisse International, as well
as to other entities is included under “Recent Global Events” below.
A description of Credit Suisse International is set out under the section of this Prospectus entitled
“Description of Credit Suisse International”. Prospective investors should note that this replaces the
description of Credit Suisse International set out under the section of the Base Prospectus entitled
“Description of the Swap Counterparty”; which is not incorporated into this Prospectus.
Nature of the Notes
None of the Issuer, the Trustee, the Agents or Credit Suisse International or any of its affiliates makes any
representation as to the performance of any Class of Notes either in absolute terms or relative to other
investments. Prospective investors must note that they may lose their entire investment in the Notes and must
27
only invest in the Notes if they fully understand the nature and risks of the Notes and also are prepared to
risk such loss. Furthermore, prospective investors must note that the performance and value of one Class of
Notes may vary compared to the performance and value of each other Class of Notes. The payouts relating to
each Class of Notes are set out in more detail in the section of this Prospectus entitled “Transaction
Description”.
The Notes are highly complex investments and involve a high level of risk. The performance of, and return
under, each Class of Notes will depend on a variety of different factors (in addition to those set out in the risk
factors set out in the Base Prospectus) specific to the Notes including, but not limited to:
(a)
the performance and financial condition of each of the Reference Entities referenced in the Credit
Default Swap Transaction relating to such Class of Notes (such Reference Entities being identical
across all Credit Default Swap Transactions), the Reference Obligations relating thereto and any
other Obligations of such Reference Entities, as described below and in the section entitled
“Transaction Description”, the exposure to which extends, for the purposes of these Notes, back to
26 September 2014, as described in more detail below;
(b)
the performance of the Class Equity Basket, in particular (a) the Equity Index Basket (and the
indices and USD/SEK foreign exchange rate referenced therein) referenced by the Equity Swap
Transaction in respect of the Class A Notes and (b) the Equity Basket (and the shares referenced
therein) referenced by the Equity Swap Transaction in respect of the Class B Notes;
(c)
the applicable Fee Calculation Factor (which is a percentage rate ranging from 100% to 94.60% (or
lower following the Scheduled Maturity Date)) that will be applied in the calculation of any amounts
receivable by the Issuer under the Credit Default Swap Transaction and the Equity Swap Transaction
relating to such Class and the deduction of any Performance Fee in the calculation of any Swap
Counterparty Equity Final Exchange Amount receivable by the Issuer under the Equity Swap
Transaction relating to such Class (which will, in part, be determined by the performance of the
Class Equity Basket referenced by such Equity Swap Transaction);
(d)
the performance and financial condition of Credit Suisse International, in its various capacities in
respect of the Notes including, without limitation, as (i) Swap Counterparty in respect of the Swap
Agreement, (ii) Calculation Agent responsible for making calculations and determinations under the
Notes and the Swap Agreement, (iii) Disposal Agent responsible for liquidating any Eligible
Securities delivered to the Issuer under the Credit Support Annex and (iv) Valuation Agent
responsible for making certain determinations under the Credit Support Annex relating to the Swap
Agreement (subject, in respect of its functions as Swap Counterparty, Calculation Agent, Disposal
Agent and Valuation Agent to its potential replacement as a result of a Swap Counterparty Default
under the Swap Agreement or a Moody’s Ba1/P-3 Downgrade as described in more detail below);
(e)
the performance and value of any Eligible Securities delivered to the Issuer under the Credit Support
Annex in connection with the Issuer’s exposure to the Swap Counterparty under the Swap
Agreement, together with the performance and financial condition of any obligor in respect of such
Eligible Securities;
(f)
the performance and financial condition of any replacement Swap Counterparty, Calculation Agent,
Disposal Agent and/or Valuation Agent, from time to time, in the event that Credit Suisse
International (or any replacement thereof) is ever replaced in any of such capacities as a result of a
Swap Counterparty Default under the Swap Agreement or a Moody’s Ba1/P-3 Downgrade, as
described in more detail below; and
(g)
any determinations made, or not made, by any Credit Derivatives Determinations Committee (a
“CDDC”) which relate to the Reference Entities, Reference Obligations and/or other Obligations
referenced in the Credit Default Swap Transaction relating to such Class of Notes (which
28
determinations made or not made will be identical across all Credit Default Swap Transactions), as
described in more detail below.
The occurrence of certain events or other developments occurring in respect of one, some or all of the above
may have an effect on the liquidity of the Notes and may have a material adverse effect on the value of the
Notes of any Class or both Classes and the value of such Notes may fall to zero. Furthermore, the occurrence
of any such events or developments may also reduce the amount payable under the Notes, potentially to zero.
The Issuer’s ability to meet its obligations under the Notes will also be dependent on the Issuing and Paying
Agent, Registrar, Transfer Agent and the Custodian performing their respective obligations under the
Transaction Documents, including the making of relevant payments when received.
Accordingly, Noteholders are exposed, among other things, to the creditworthiness of (a) Credit Suisse
International as Swap Counterparty, Disposal Agent, Valuation Agent and Calculation Agent, (b) the
Reference Entities, (c) the Issuing and Paying Agent, and (e) the Custodian.
More detail in respect of certain risks relating to the factors outlined above, along with other risks associated
with the Notes are set out below, and elsewhere in this Prospectus and in the risk factors outlined in the Base
Prospectus. Accordingly, prospective investors who consider purchasing the Notes should reach an
investment decision only after carefully considering the suitability of the Notes in light of their particular
circumstances. Investment in the Notes may only be suitable for investors who:
(a)
have substantial knowledge and experience in financial, business matters and expertise in assessing
credit risk which enable them to evaluate the merits and risks of an investment in the Notes and the
rights attaching to the Notes;
(b)
are capable of bearing the economic risk of an investment in the Notes for an indefinite period of
time;
(c)
are acquiring the Notes for their own account (as principal and not as agent) for investment, not with
a view to resale, distribution or other disposition of the Notes (subject to any applicable law
requiring that the disposition of the investor’s property be within its control);
(d)
recognise that it may not be possible to make any transfer of the Notes for a substantial period of
time, if at all; and
(e)
are prepared to risk a loss of their entire investment in the Notes as a result of events that occur in
respect of the Reference Entities that are referenced in the Credit Default Swap Transactions (along
with the Reference Obligations and other Obligations relating thereto) not just from the Issue Date
but from 26 September 2014.
Payments of Additional Payout Amounts and postponement of scheduled maturity of the Notes
The Additional Payout Amount (if any) relating to each Class of Notes will be an amount equal to the Swap
Counterparty Equity Final Exchange Amount (if any) receivable by the Issuer under the Equity Swap
Transaction relating to such Class which takes into account the application of the applicable Fee Calculation
Factor (which is a percentage rate ranging from 100% to 94.60% (or lower following the Scheduled Maturity
Date)) and the deduction of any Performance Fee relating to such Class (as more fully described in
“Payments of Commissions to the Distributor - Notes” below) depending, in part, on the performance of the
Class Equity Basket referenced by such Equity Swap Transaction.
Accordingly, the return to an investor on the Scheduled Maturity Date in such circumstances will, in part,
depend on the performance of the Equity Index Basket (if such investment was in Class A Notes) or the
Equity Basket (if such investment was in Class B Notes), the application of the Fee Calculation Factor in
29
respect of the relevant Class of Notes and the deduction of the Performance Fee (if any) in respect of the
relevant Class of Notes. In the event that:
(a)
due to the terms of the Equity Swap Transaction relating to Class A Notes, no Swap Counterparty
Equity Final Exchange Amount is payable to the Issuer thereunder, no Additional Payout Amount
will be payable in respect of any Class A Notes; or
(b)
due to the terms of the Equity Swap Transaction relating to Class B Notes, no Swap Counterparty
Equity Final Exchange Amount is payable to the Issuer thereunder, no Additional Payout Amount
will be payable in respect of any Class B Notes.
The performance of the Equity Index Basket and the Equity Basket is expected to be different, and by
extension, this can also affect any Performance Fee payable in respect of each Class of Notes (which will, in
part, depend on the performance of the relevant Class Equity Basket). Accordingly, investors should note
that different Additional Payout Amounts (which are calculated to reflect the deduction of the Performance
Fees (if any)) may be payable in respect of different Classes of Notes and it may be the case that (i) an
Additional Payout Amount may be payable in respect of the Class A Notes but not in respect of the Class B
Notes, or (ii) an Additional Payout Amount may be payable in respect of the Class B Notes but not in respect
of the Class A Notes.
Therefore holders of a particular Class of Notes may receive less than holders of the other Class of Notes as
a result of the performance of the Class Equity Basket.
Please see, in particular, the section below in these risk factors entitled “Certain risks relating to the baskets
of shares referenced in the Equity Index Basket and the Equity Basket”.
Equity Swap Transactions
Investors must note that, although the Issue Price of the Notes is 100% of the Outstanding Principal
Amount of the Notes (as the same may be reduced as a result of Credit Events being determined under
the Credit Default Swap Transactions relating to each Class), on the Scheduled Maturity Date of the
Notes, the amount due by the Swap Counterparty under each relevant Credit Default Swap
Transaction is 94.60% (being the Fee Calculation Factor as at the Scheduled Maturity Date) of the
then Outstanding Principal Amount of the Notes. Investors will therefore be dependent, in part, on the
performance of the relevant Class Equity Basket referenced by the Equity Swap Transaction relating
to such Class of Notes for any further return on their Notes and to recover an amount at least equal to
their investment in the Notes. Investors should be aware that such further returns under the relevant
Class of Notes are still subject to any reduction through application of the Fee Calculation Factor for
the relevant Class of Notes and deduction of the Performance Fee (if any) in respect of the relevant
Class of Notes (which will, in part, be dependent on the performance of the Class Equity Basket
relating to such Class).
A number of market, economic, legal and regulatory and other factors may affect the performance of the
indices (and the USD/SEK foreign exchange rate) and shares referenced in the Equity Swap Transaction
relating to the Class A Notes or the Class B Notes respectively. Such factors may include, without limitation,
interest rates, currency exchange rates, geographically and industrially specific economic factors linked to
the geographical areas and industrial sectors of the companies to which such shares relate, sovereign credit
risk and the stability of the financial system among others. Investors must not invest in any of the Notes
unless they are able to fully understand the terms of the Equity Swap Transactions and assess the risks
associated with the Equity Swap Transactions and understand that the performance of each Equity Swap
Transaction and each related Class of Notes is dependent on the performance of the Class Equity Basket
referenced by the Equity Swap Transaction relating to such Class of Notes. Investors may request electronic
copies of the confirmation of the Equity Swap Transactions free of charge from the Issuer and the Issuing
and Paying Agent.
30
Credit Suisse International acts in a number of capacities in respect of, and related to, the Notes, including,
as Swap Counterparty in respect of the Equity Swap Transactions. Accordingly, investors are also exposed to
the credit risk of Credit Suisse International as Swap Counterparty. If Credit Suisse International were to
default under its obligations under an Equity Swap Transaction as a result of insolvency, bankruptcy or for
any other reason, then the value of the related Class of Notes would be significantly affected and may even
fall to zero. It is also highly likely in such circumstances that an Early Redemption Event would occur in
respect of the Notes. More detail regarding the exposure to Credit Suisse International in respect of the Notes
is set out above and below including, without limitation, under “Risks relating to Credit Suisse International
as Swap Counterparty and other capacities in respect of the Notes” and “Recent Global Events”.
Certain risks relating to the baskets of indices or shares referenced in the Equity Index Basket and the
Equity Basket.
The Equity Index Basket references three indices of shares, each with a separate weighting, which track
companies based in Taiwan, Singapore and Hong Kong. Indices are comprised of a synthetic portfolio of
shares or other assets, and as such, the performance of an index is dependent upon the macroeconomic
factors relating to the shares or other components that comprise such index, which may include interest and
price levels on the capital markets, currency developments, political factors and (in the case of shares)
company-specific factors such as earnings position, market position, risk situation, shareholder structure and
distribution policy. Furthermore, the sponsor of an index can add, delete or substitute the components of
such index or make other methodological changes that could change the level of one or more components.
The changing of the components of an index may affect the level of such index as a newly added component
may perform significantly worse or better than the component it replaces. The sponsor of an index may also
alter, discontinue or suspend calculation or dissemination of such index. The sponsor of an index will have
no involvement in the offer and sale of the Notes and will have no obligation to any investor in such Notes.
The sponsor of an index may take any actions in respect of such index without regard to the interests of the
investor in the Notes, and any of these actions could have an adverse effect on the value of the Notes.
The shares referenced in the Equity Basket relate to ten companies which operate in a wide variety of
business areas including telecommunications, oil and gas, energy, beverages, pharmaceuticals and
healthcare, chemicals and insurance. Each of these companies has significant operations in Europe but also
has significant international operations.
Accordingly, the performance of each of the companies whose shares are referenced in the Equity Basket
may be significantly affected by market developments in each of the business areas in which it operates as
well as economic, political and natural developments, changes and disasters that occur in respect of the
regions in which it operates. Furthermore, in connection with businesses generally, the performance of each
such company is likely to be affected by macro-economic issues affecting business on a continental and
global basis. Other matters, such as litigation, regulatory changes, competition, management and other issues
may also have a significant effect on the performance of any company, and its shares, referenced in the
Equity Basket.
The Swap Counterparty Equity Final Exchange Amount receivable by the Issuer in respect of each Equity
Swap Transaction relating to a Class of Notes (which determines the Additional Payout Amount, if any,
payable in respect of such Class of Notes) is determined pursuant to a formula set out in the terms of the
applicable Equity Swap Transaction (as described in more detail in the sections of this Prospectus entitled
“Transaction Description” and “Description of the Equity Swaps”). Pursuant to this formula, such Swap
Counterparty Equity Final Exchange Amount in respect of each Equity Swap Transaction is significantly
dependent on the aggregate average share price or weighted average index level in the applicable Class
Equity Basket on the quarterly Averaging Dates falling during the duration of such Equity Swap Transaction
being higher than the aggregate share price or weighted index level as at the Initial Setting Date as well as
any variations in the USD/SEK foreign exchange rate (in respect of the Equity Swap Transaction relating to
the Class A Notes only) as described below. Accordingly, the worse one or more shares or indices perform
on one or more Averaging Dates in respect of the relevant Class Equity Basket the lower the Swap
Counterparty Equity Final Exchange Amount in respect of such Class Equity Basket (which may have the
31
effect of reducing the Additional Payout Amount in respect of the related Class of Notes) will be and may
even cause such Swap Counterparty Equity Final Exchange Amount (and related Additional Payout
Amount) to be zero.
It is important to note that the average share price of each share comprised in the Equity Basket and the
weighted average of each index comprised in the Equity Index Basket is determined by reference to the share
prices or index levels on a quarterly basis on each Averaging Date. Accordingly, it is the price of such share
on such Averaging Dates that is relevant and not the price of such share at any other time for the purposes of
the formula applied in determining the Swap Counterparty Equity Final Exchange Amount due under the
Equity Swap Transactions. Accordingly, while the price of one or more shares comprised in a particular
Class Equity Basket may, on average, increase during the duration of the relevant Equity Swap Transaction,
this may not be reflected in the Swap Counterparty Equity Final Exchange Amount (if any) payable to the
Issuer. Similarly, while the level of one or more indices comprised in the Equity Index Basket may, on a
weighted average, increase during the duration of the relevant Equity Swap Transaction, this may not be
reflected in the Swap Counterparty Equity Final Exchange Amount (if any) payable to the Issuer.
Certain risks relating to the USD/SEK foreign exchange rate referenced in the Equity Swap Transaction
relating to the Class A Notes
The formula for determining the Swap Counterparty Equity Final Exchange Amount payable to the Issuer in
respect of the Equity Swap Transaction relating to the Class A Notes also references a USD/SEK foreign
exchange rate. This will change on a daily basis from its position as at the day preceding the Initial Setting
Date in respect of the Equity Index Basket and is determined by reference to the applicable daily fixing rate
of exchange of SEK per EUR 1 divided by the daily fixing rate of exchange of USD per EUR 1.
Accordingly, fluctuations in the level of the USD/SEK foreign exchange rate (including those arising as a
result of fluctuations in the EUR/USD exchange rate) affect the amount of any such Swap Counterparty
Equity Final Exchange Amount and accordingly, the return on the Class A Notes and such effect may be
negative as well as positive.
Disruption Events in respect of the Equity Swap Transactions
Credit Suisse International as Calculation Agent in respect of the Equity Swap Transaction relating to each
Class of Notes may determine that a Market Disruption Event (as defined in the 2002 Equity Derivatives
Definitions published by ISDA (the “Equity Derivatives Definitions”) incorporated by reference in the
confirmation of the relevant Equity Swap Transaction) has occurred in respect of the relevant Class Equity
Basket on a relevant Averaging Date or Initial Setting Date. Market Disruption Events include events
relating to the early closure of the relevant stock exchange, suspension or limitation of trading of any
relevant share referenced or tracked in such Class Equity Basket or, any event that disrupts or impairs the
ability of market participants to effect transactions in or obtain market values for any relevant share
referenced or tracked in such Class Equity Basket. Any such determination by Credit Suisse International as
Calculation Agent in respect of an Equity Swap Transaction that a Market Disruption Event has occurred,
may have an adverse effect on the value of the relevant Equity Swap Transaction and may significantly delay
the settlement date of such Equity Swap Transaction and, accordingly, the final payment under the relevant
Equity Swap Transaction and the Maturity Date of the relevant Class of Notes.
Additional Disruption Events in respect of the Equity Swap Transactions
If Credit Suisse International as Calculation Agent under the Swap Agreement determines that, in respect of
any Equity Swap Transaction, a Change in Law, Insolvency Filing (other than in respect of the Equity Swap
Transaction relating to the Class A Notes), Hedging Disruption or Increased Cost of Hedging (each as
defined in the Equity Derivatives Definitions) has occurred (each such event, being an “Additional
Disruption Event” in respect of the relevant Equity Swap Transaction), it will determine (i) that such
adjustments be made to the terms of the relevant Equity Swap Transaction to take account of such Additional
Disruption Event or (ii) that no adjustments to the terms of the relevant Equity Swap Transaction would
achieve a commercially reasonable result and as such it may deem that the Equity Swap Transaction affected
32
by such Additional Disruption Event would be terminated. The termination of such Equity Swap Transaction
will trigger the termination of the corresponding Credit Default Swap Transaction and an early redemption
of the Class of Notes to which it relates.
Accordingly, the occurrence of any Additional Disruption Event may have an adverse effect on the value of
the Equity Swap Transaction and the related Class of Notes. Furthermore, as a result of such adjustment in
respect of the relevant Equity Swap Transaction as a result of such Additional Disruption Event, the
Additional Payout Amount, if any, payable on redemption of the relevant Class of Notes may be
significantly lower than if such Additional Disruption Event had not occurred and may even be zero. Such
Additional Disruption Event could also delay the settlement date of the relevant Equity Swap Transaction
and, accordingly, the final payment under the relevant Equity Swap Transaction and the Maturity Date of the
Notes.
Further Adjustments in respect of the Equity Swap Transactions in respect of the Class A Notes and the
Class B Notes
Pursuant to the terms of the Equity Swap Transaction relating to the Class A Notes, Index Adjustment
Events in respect of the indices referenced in the Equity Index Basket (including index modification, index
cancellation and index disruption) may occur. If Credit Suisse International, as Calculation Agent in respect
of the Equity Swap Transactions referencing the Equity Index Basket determines that any such event has
occurred, the relevant Equity Swap Transaction may be terminated or it may make such adjustments to the
terms of the relevant Equity Swap Transaction, including in connection with the indices referenced therein
and any calculations or determinations made, or to be made, in connection with amounts payable in respect
of such Equity Swap Transaction to account for such event.
Pursuant to the terms of the Equity Swap Transactions relating to the Class B Notes, Extraordinary Events in
respect of the shares referenced in the Equity Basket (including merger events, tender offers, de-listing
events, nationalisation and insolvency), as well as certain Potential Adjustment Events, may occur. If Credit
Suisse International, as Calculation Agent in respect of the Equity Swap Transactions referencing such Class
Equity Basket determines that any such event has occurred, the relevant Equity Swap Transaction may be
terminated, or it may make such adjustments to the terms of the relevant Equity Swap Transaction, including
in connection with the shares referenced therein and any calculations or determinations made, or to be made,
in connection with amounts payable in respect of such Equity Swap Transaction to account for such event.
In respect of Index Adjustment Events and Extraordinary Events, if Credit Suisse International as
Calculation Agent in respect of the Equity Swap Transactions referencing such relevant Class Equity Basket
determines that no adjustments to the terms of the relevant Equity Swap Transactions would achieve a
commercially reasonable result, then it may deem that the Equity Swap Transactions affected by such
Additional Disruption Event would be terminated. The termination of such Equity Swap Transaction will
trigger the termination of the corresponding Credit Default Swap Transaction and an early redemption of the
Class of Notes to which it relates.
Accordingly, any such events may have a significant, negative effect on the value of the Equity Swap
Transaction and may reduce any Swap Counterparty Equity Final Exchange Amount receivable by the Issuer
under the Equity Swap Transaction and the Additional Payout Amount payable on the relevant Class of
Notes.
The Credit Default Swap Transactions
Each Class of Notes is credit-linked as a result of the Credit Default Swap Transaction relating to such Class
of Notes. The terms of the Credit Default Swap Transactions relating to each Class shall be identical save for
(a) the Class Notional Amount which, in respect of each Credit Default Swap Transaction, shall be equal to
the Outstanding Principal Amount of such Class and (b) the Class Redemption Factor.
33
Prospective investors should note that the Credit Default Swap Transactions are complex and bespoke
transactions. An investment in the Notes is only suitable for investors who are familiar with credit
derivatives. Investors must not invest in any of the Notes unless they are able to fully understand the terms of
the Credit Default Swap Transactions and assess the risks associated with the Credit Default Swap
Transactions. Investors may request electronic copies of the confirmation of the Credit Default Swap
Transactions free of charge from the Issuer and the Issuing and Paying Agent.
In particular, although the confirmation in respect of the Credit Default Swap Transactions incorporates by
reference the 2014 ISDA Credit Derivatives Definitions as published by the International Swaps and
Derivatives Association, Inc. (“ISDA”), the Credit Default Swap Transactions are bespoke transactions
which may differ in significant respects from other credit derivative transactions.
Prospective investors should note that, irrespective as to the occurrence of Credit Events in respect of the
Reference Entities, as described below and elsewhere in this Prospectus, if the Swap Agreement terminates
early in connection with, or which results in, an Early Redemption Event, the amount payable to the
Noteholders will principally depend on the amount payable, if any, by the Swap Counterparty to the Issuer as
a result of the termination of the Swap Agreement. This, in turn, will depend on the value of the Equity Swap
Transactions and the Credit Default Swap Transactions at such time, as determined in the manner set out in
the Swap Agreement. While it is anticipated that the value of the Equity Swap Transactions and the Credit
Default Swap Transactions will be in favour of the Issuer, there can be no assurance what such value may be.
Such value may be affected by a wide variety of factors, including, without limitation, the market value of
the Equity Swap Transactions relating to the relevant Class, the level of credit spreads on the Reference
Entities referenced in the Credit Default Swap Transactions, the specific terms of the Equity Swap
Transactions and the Credit Default Swap Transactions and the willingness and/or ability of participants in
the credit derivatives market to provide quotations for entering into transactions such as the Credit Default
Swap Transactions, as well as broader economic, political and other factors. Accordingly, upon the
occurrence of an Early Redemption Event in respect of the Notes, investors may lose their entire investment
in the Notes.
The Reference Entities and the Reference Obligations and other Obligations
Noteholders of each Class will be exposed to the credit and insolvency risk of the Reference Entities (as the
same may change prior to the Issue Date as a result of the determination of one or more successor Reference
Entities on or after the Successor Backstop Date (or, in the case of a “Universal Successor”, on or after 1
January 2014), as described below) and also to failures to make payment and restructurings in respect of any
Obligations of such Reference Entities (save in respect of a Reference Entity that is a US Reference Entity)
and not just to the Reference Obligations of such Reference Entities. Noteholders of each Class will be
exposed to such risk with respect to the Reference Entities for the period from and including the Successor
Backstop Date (or, in the case of a “Universal Successor”, 1 January 2014) to the Issue Date as well as after
the Issue Date.
The Reference Entities referenced in each Credit Default Swap Transaction as at the Issue Date will be
identical across the Credit Default Swap Transactions for all Classes of Notes and will comprise four
Reference Entities described in the section of this Prospectus entitled “Description of the Reference
Entities”, as the same may change prior to the Issue Date as a result of the determination of one or more
successor Reference Entities on or after the Successor Backstop Date (or, in the case of a “Universal
Successor”, on or after 1 January 2014), as described below.
Prospective investors must note that none of Credit Suisse International (in any capacity), the Issuer,
the Trustee, any Agent or the Distributor is under any obligation to monitor whether or not a Credit
Event or Credit Event Resolution Request Date has occurred in respect of a Reference Entity or any
responsibility for monitoring any other developments, announcements or publications relating to any
Reference Entity and shall have no liability or responsibility to any Noteholder or any other person in
the event of the occurrence of any Credit Event or Credit Event Resolution Request Date in respect of
any Reference Entity. Furthermore, none of the Issuer, Credit Suisse International, the Trustee nor
34
any Agent, in any capacity, shall have any liability to any Noteholder in respect of any loss suffered as
a result of any Reference Entity included in the Credit Default Swap Transactions.
None of the Issuer, Credit Suisse International, the Trustee nor any Agent shall provide any
information in respect of any Reference Entity to any prospective investor save for the information
provided in this Prospectus. Further information in respect of the Reference Entities may be available
from publicly available sources, including, without limitation, from the websites of the stock exchanges
on which the Reference Entities have securities listed (including those websites set out in the section of
this Prospectus entitled “Description of the Reference Entities”).
As a result of the occurrence of Credit Events occurring in respect of Reference Entities prior to the Issue
Date (as well as after the Issue Date), it is possible that a prospective investor’s investment in the Notes may
be reduced to zero. Prospective investors should only make an investment in the Notes if they fully
understand and are prepared to accept this risk, as well as the other risks relating to the Notes.
Each of the Reference Entities (subject to the determination of one or more successor Reference Entities on
or after the Successor Backstop Date (or, in the case of a “Universal Successor”, on or after 1 January 2014),
as described below) are banks who, between them, have operations across the globe including in Europe, the
United States of America, Asia and South America.
The banking industry generally has been, and continues to be, subject to significant volatility due to the
economic crisis that commenced during mid-2007. Banks are exposed to a number of international factors
which may have a materially adverse effect on their financial performance including, without limitation, the
factors set out under the heading “Risks relating to the business of Credit Suisse International as Swap
Counterparty and other capacities in respect of the Notes” above.
As indicated, these factors and those events outlined in “Recent Global Events” below as well as other
factors may affect (i) the probability of Credit Events occurring in respect of the Reference Entities,
Reference Obligations and/or other Obligations referenced in the Credit Default Swap Transactions, (ii) the
probability of one or more successor Reference Entities being determined in respect of the Reference Entities
referenced in the Credit Default Swap Transactions and/or the value of the Credit Default Swap
Transactions. Accordingly, as a result investors may suffer a loss of some or all of their investment on the
relevant Class(es) of Notes in which they invested as a result of Credit Events occurring under the Credit
Default Swap Transactions or, in the case of an early redemption of the Notes following an Early
Redemption Event (including following the occurrence of an Event of Default in respect of the Notes), a
reduction in the value in favour of the Issuer (or potentially even an increase in value in favour of the Swap
Counterparty) of the Credit Default Swap Transactions.
Reference Entities may change as a result of the determination of a successor Reference Entity
Prospective investors should note that the Reference Entities to which the Notes are referenced through each
of the Credit Default Swap Transactions may change from time to time following the occurrence of certain
corporate events relating to any Reference Entity, such as a merger of the Reference Entity with another
entity, a transfer of assets or liabilities by the Reference Entity or other similar event in which an entity
succeeds to the obligations of another entity, whether by operation of law or pursuant to any agreement.
ISDA may publicly announce that a CDDC has resolved to treat a different entity or entities as the
successor(s) to such original entity. If the Issuer determines that such CDDC resolution would apply for
purposes of the Credit Default Swap Transactions, then the identity of the Reference Entity will be amended
accordingly and Noteholders will be exposed to the credit risk of such successor Reference Entity in place of
the original Reference Entity. Accordingly, the Issuer, the Swap Counterparty and the Noteholders will be
bound by any such determination of the relevant CDDC, whether or not their views may differ from that of
the relevant CDDC. Alternatively, absent a resolution of the CDDC, the Calculation Agent may, but will not
be obliged to, make a determination that a different entity has become successor to the original Reference
Entity. The effect of such amendment may be a material increase in the risk associated with an investment in
35
the Notes, for example where the successor Reference Entity is more indebted than the original Reference
Entity or is exposed to different business risks.
If a Reference Entity has more than one successor entity, then Noteholders will be exposed to the
creditworthiness of multiple Reference Entities instead of or in addition to the original Reference Entity. The
effect may be to materially increase the likelihood of a loss of principal under the Notes as a result of a
Credit Event occurring with respect to a number of Reference Entities rather than just such original
Reference Entity. If more than one successor Reference Entity is determined, the Class Notional Amount of
each Credit Default Swap Transaction allocated to any remaining Reference Entity, including each new
successor Reference Entity, shall be adjusted to reflect the inclusion of such new successor Reference Entity
and such allocation may not be in the same proportion as the original allocation.
Any such determination may increase the likelihood of Credit Events occurring and accordingly increase the
possibility of investors suffering a loss, potentially of their entire investment, on the Notes.
Furthermore, it is possible that one or more successor Reference Entities may have been determined with
respect to a Reference Entity prior to the Issue Date of the Notes, as described below. To such extent, the
Reference Entities referenced in the Credit Default Swap Transactions may not comprise any of the
Reference Entities described in this Prospectus.
Credit Event and Successor Backstop Dates
Prospective investors should note that, in respect of each Class of Notes, the exposure to the risks associated
with the Reference Entities referenced in the related Credit Default Swap Transaction includes exposure in
the period from and including 26 September 2014 (being the Credit Event Backstop Date) to the Issue Date.
As a result, the aggregate amount payable in respect of each Class of Notes (save for any amount payable on
such Notes linked to the performance of the relevant Class Equity Basket) will be reduced, potentially to
zero (depending on the number of Credit Events that occur) as described below, as a result of one or more
Credit Events notwithstanding that the relevant Credit Event(s), or the events leading thereto, occurred prior
to the Issue Date of the Notes.
Similarly, with respect to whether there is a successor Reference Entity, the look-back period runs from 27
August 2014 (being the Successor Backstop Date) (or, in the case of a “Universal Successor”, on or after 1
January 2014) and it is therefore possible that the Notes could be affected by one or more successions that
take place prior to the Issue Date and, accordingly, may increase the risk of loss to investors notwithstanding
that the relevant succession occurred prior to the Issue Date of the Notes.
The “Universal Successor” exception to the Successor Backstop Date applies to a entity which assumes all
obligations (including at least one relevant Bond or Loan Obligation) of the non-sovereign Reference Entity
in circumstances where such Reference Entity ceases to exist or is in the process of being dissolved and has
not issued or incurred any Borrowed Money obligation since the date of such assumption. Such entity will be
the sole successor to the Reference Entity provided that the succession occurred on or after a single lookback
date of 1 January 2014.
No representations; no guarantee of performance
None of the Issuer, the Trustee, any Agent or Credit Suisse International (or any of its affiliates) has made or
will make any representation whatsoever with respect to any Reference Entity referenced in the Credit
Default Swap Transactions or any of their obligations (including any Reference Obligation) on which any
Noteholder is relying or is entitled to rely. None of the Issuer, the Trustee, any Agent or Credit Suisse
International (or any of its affiliates) is responsible for any Reference Entity’s public disclosure of
information.
There is no guarantee, protection or assurance for investors in the Notes in respect of the credit or
performance of any Reference Entity referenced in the Credit Default Swap Transactions or any of its
obligations or those of any entity whose obligations may be guaranteed by a Reference Entity (an
36
“Underlying Obligor”). Credit Suisse makes no representation as to the performance of the Notes either in
absolute terms or relative to other investments.
Payments under the Credit Default Swap Transactions and allocation of losses following Credit Events
In consideration for the issue of the Notes by the Issuer, the Dealer will procure that on the Issue Date, the
Swap Counterparty will enter into each Credit Default Swap Transaction with the Issuer, and the Dealer will
pay or arrange the payment of an initial exchange amount to the Swap Counterparty under such Credit
Default Swap Transaction (such amount expected to be between 75% and 95% of the Aggregate Nominal
Amount of the relevant Class of Notes on the Issue Date).
Under the terms of the Credit Default Swap Transaction relating to each Class of Notes:
(a)
the Class Notional Amount of such Credit Default Swap Transaction will be equal to the
Outstanding Principal Amount of the Class of Notes to which such Credit Default Swap Transaction
relates;
(b)
if a Credit Event occurs in respect of a Reference Entity referenced in such Credit Default Swap
Transaction and an Event Determination Date is determined:
(i)
an amount equal to the Credit Suisse Cash Settlement Amount will be payable by the Swap
Counterparty to the Issuer on the date falling 5 Reference Business Days after the latest date
on which the Auction Final Price, or where the Fallback Settlement Method is applicable,
the Final Price is determined in respect of the Reference Entity (the “Credit Suisse Cash
Settlement Date”). On the date falling 2 Reference Business Days after the Credit Suisse
Cash Settlement Date (the “Credit Event Instalment Date”), in respect of each Note of
such Class the Issuer will pay an amount equal to its pro rata share of an amount equal to
the Credit Suisse Cash Settlement Amount (the “Credit Event Instalment Amount”) to the
Noteholder (which may occur before or after the Scheduled Maturity Date);
(ii)
the Class Notional Amount of the Credit Default Swap Transaction will be reduced by an
amount equal to the Reference Entity Notional Amount (or, in respect of a Relevant
Restructuring (as defined in the Credit Default Swap Transaction), the Reference Entity
Notional Amount multiplied by a percentage as elected by the Swap Counterparty) in
respect of the Reference Entity as at the relevant Credit Suisse Cash Settlement Date. If such
Credit Suisse Cash Settlement Date falls on or after the Final Exchange Date (as described
below), the Class Notional Amount will be deemed to have been so reduced as at the Final
Exchange Date (as described below);
all as described in the section of this Prospectus entitled “Transaction Description”;
(c)
on the Reference Business Day immediately preceding the Scheduled Maturity Date of the Class of
Notes to which such Credit Default Swap Transaction relates (such date, the “Final Exchange
Date”), the Swap Counterparty will pay to the Issuer an amount equal to the product of (i) the then
outstanding Class Notional Amount of such Credit Default Swap Transaction and (ii) the Fee
Calculation Factor applicable as at the relevant Final Exchange Date (such amount, the “Final
Exchange Amount”); provided that if the termination date of the relevant Credit Default Swap
Transaction has been extended beyond the applicable Final Exchange Date as a result of the Credit
Suisse Cash Settlement Amount being due and payable after the Final Exchange Date or an
Unsettled Credit Event being determined as at the Credit Event Observation Period End Date
(expected to be the Reference Business Day immediately prior to the Scheduled Maturity Date), the
Final Exchange Amount will be calculated on the basis that the Class Notional Amount is reduced
by the Reference Entity Notional Amount of the Reference Entity to which such event relate (and
may be zero). On the Scheduled Maturity Date, in respect of each Note of such Class the Issuer will
pay an amount equal to its pro rata share of an amount equal to the Final Exchange Amount (if any)
to the Noteholder; and
37
(d)
following the determination of an Unsettled Credit Event as at the Credit Event Observation Period
End Date, if it is determined that no Credit Event has occurred in respect of the Reference Entity, on
the date immediately following the date of such determination (such date, the “Additional
Exchange Date”), the Swap Counterparty will pay to the Issuer an amount equal to the product of (i)
the Reference Entity Notional Amount in respect of such Reference Entity and (ii) the Fee
Calculation Factor applicable as at the relevant Additional Exchange Date (such amount, the
“Additional Exchange Amount”). On the date falling two Reference Business Days after the
Additional Exchange Date (the “Unsettled Credit Event Instalment Date”), in respect of each
Note of such Class of such Class the Issuer will pay an amount equal to its pro rata share of an
amount equal to the Additional Exchange Amount (the “Unsettled Credit Event Instalment
Amount”) to the Noteholder. However, if it is determined that a Credit Event has occurred (or,
where applicable, the Auction Final Price or the Final Price has been determined) in respect of the
Reference Entity, the Swap Counterparty will pay the Credit Suisse Cash Settlement Amount in
respect of such Reference Entity on the related Credit Suisse Cash Settlement Amount, and in
respect of each Note of such Class the Issue will pay the Credit Event Instalment Amount on the
related Credit Event Instalment Date.
Investors may suffer significant losses on their investment as a result of the occurrence of one or more Credit
Events occurring in respect of the Reference Entities referenced in the Credit Default Swap Transactions.
Extension of the Maturity Date of the Notes as a result of Unsettled Credit Events
It follows from the above description of payments under the Credit Default Swap Transactions and allocation
of losses following Credit Events that the termination date of the Credit Default Swap Transactions may
extend beyond the Final Exchange Date and, accordingly, the final maturity date of the Notes may be
extended beyond the Scheduled Maturity Date. Such occurrence may arise where a Credit Suisse Cash
Settlement Amount is due and payable after the Final Exchange Date or where an Unsettled Credit Event is
determined as at the Credit Event Observation Period End Date. Unsettled Credit Events will arise, in
summary, where:
(a)
one or more Credit Events have occurred in respect of one or more Reference Entities on or prior to
the Credit Event Observation Period End Date but in respect of which the Auction Final Price, or
where the Fallback Settlement Method is applicable, the Final Price, has not been determined by
such Credit Event Observation Period End Date; or
(b)
a Potential Credit Event has been determined by the Calculation Agent under the Credit Default
Swap Transactions (being, in effect, an event which, in the sole and absolute determination of the
Calculation Agent, may be a Credit Event) on or prior to the Credit Event Observation Period End
Date.
In the event that there is an Unsettled Credit Event under Credit Default Swap Transaction relating to each
Class of Notes, the Final Exchange Amount payable by the Swap Counterparty to the Issuer will be equal to
the product of (i) the Class Notional Amount minus the Reference Entity Notional Amount of the Reference
Entity to which such Unsettled Credit Event relates and (ii) the Fee Calculation Factor applicable as at the
Final Exchange Date (such Final Exchange Amount may be zero).
Following the determination of the Unsettled Credit Event, in respect of the Reference Entity:
(a)
if it is determined that no Credit Event has occurred, the Swap Counterparty will pay the Additional
Exchange Amount to the Issuer on the related Additional Exchange Date under the Credit Default
Swap Transaction. The Issuer will then pay the Unsettled Credit Event Instalment Amount in respect
of each Note of such Class on the related Unsettled Credit Event Instalment Date occurring on or
after the Scheduled Maturity Date; and
38
(b)
if it is determined that a Credit Event has occurred (or the Auction Final Price or the Final Price has
been determined), the Swap Counterparty will pay the Credit Suisse Cash Settlement Amount to the
Issuer on the related Credit Suisse Cash Settlement Amount under the Credit Default Swap
Transaction. The Issuer will then pay the Credit Event Instalment Amount in respect of each Note of
such Class on the Credit Event Instalment Date occurring on or after the Scheduled Maturity Date.
Accordingly, prospective investors must note that in the event that there is any Unsettled Credit Event under
each Credit Default Swap Transaction as at the Credit Event Observation Period End Date, the final
redemption date of each Class may be significantly postponed and Noteholders of such Class will not receive
the full amount due to them (if at all) until a significant time after the Scheduled Maturity Date. In such
circumstances, the value of the Notes of each Class may be significantly reduced, and may even be zero.
Furthermore, to the extent that any secondary market for the Notes existed, any liquidity provided by such
secondary market may be significantly reduced and Noteholders may not be able to sell their Notes or realise
any value for them.
Conflicts of interest relating to Credit Suisse and the Credit Default Swap Transactions
As described above and elsewhere in this Prospectus, under the Credit Default Swap Transactions, the Issuer
is selling credit protection to Credit Suisse International in its capacity as Swap Counterparty. As a result of
such transactions, Credit Suisse International and the Issuer will have a direct conflict of interest, since the
occurrence of any Credit Events and related Event Determination Dates will reduce the aggregate amounts
payable to investors under the Notes, including at maturity. Credit Suisse International may retain the credit
protection sold to it by the Issuer for its own proprietary investment purposes or to hedge its risk unrelated to
the Notes or it may sell such protection to third parties. Sales of credit protection may be made to one or
more third parties and may be made using individual credit default swap transactions relating to each
Reference Entity or using a single transaction referencing two or more of the Reference Entities.
Credit Suisse International may deal in the obligations of each Reference Entity and may accept deposits
from, make loans or otherwise extend credit to, and generally engage in any kind of commercial or
investment banking or other business with, a Reference Entity, an Underlying Obligor or any affiliate of a
Reference Entity or an Underlying Obligor, or any other person or entity having obligations relating to a
Reference Entity or any Underlying Obligor, and may act with respect to such business in the same manner
as each of them would if the Notes did not exist, regardless of whether any such action might have an
adverse effect on a Reference Entity, any Underlying Obligor or the position of any Noteholder or otherwise
(including, without limitation, any action which might constitute or give rise to a Credit Event).
Following the Issue Date, Credit Suisse International may, whether by virtue of the types of relationships
described herein or otherwise, at any time, be in possession of information in relation to a Reference Entity
or any Underlying Obligor that is or may be material in the context of the issue of the Notes and that may or
may not be publicly available or known to a Noteholder, and the Notes do not create any obligation on the
part of Credit Suisse International to disclose to any Noteholder any such relationship or information
(whether or not confidential).
Credit Suisse International is also a voting member on each of the CDDCs and may take certain actions that
may influence the process and outcome of decisions of the CDDCs. Such actions may be adverse to the
interests of the Noteholders and may result in an economic benefit accruing to Credit Suisse International
under the Swap Agreement or otherwise. In taking any action relating to the CDDCs or performing any duty
under the rules that govern the CDDCs set forth in the Credit Derivatives Determinations Committees Rules
(the “Rules”), Credit Suisse International shall have no obligation to consider the interests of the
Noteholders and may ignore any conflict of interest arising in respect of the Notes.
To the extent that Credit Suisse International is replaced as Swap Counterparty, the above conflicts of
interest may no longer be applicable. However, similar conflicts of interest and/or additional conflicts of
interest may be applicable in respect of the relevant replacement Swap Counterparty.
39
Reference Entities not liable for the Notes
No Reference Entity is involved in the issuance of the Notes in any way and has no obligation to consider the
interests of the Noteholders in taking any corporate actions that might affect the value of the Notes. Any
Reference Entity may, and is entitled to, take actions that will adversely affect the value of the Notes. The
purchase price paid for each Class of Notes is paid to the Issuer and a portion of it is paid to Credit Suisse
International under the Credit Default Swap Transaction relating to such Class of Notes as described above
and elsewhere in this Prospectus. However, no portion of such issue proceeds is paid to any Reference Entity,
and the Notes do not represent a direct investment in any Obligation of any Reference Entity or otherwise
give the Noteholders any rights in the debt obligations or any other securities of any Reference Entity. As an
owner of Notes, a Noteholder will not have special voting rights or rights to receive distributions or any
other rights that holders of debt obligations or other securities of any Reference Entity may have.
Factors influencing the risk of a Credit Event
The likelihood of a Credit Event occurring in respect of any Reference Entity will generally fluctuate with,
among other things, the financial condition and other characteristics of such Reference Entity, general
economic conditions, the condition of certain financial markets, political events, developments or trends in
particular industry and changes in prevailing interest rates. Some factors influencing the risk of Credit Events
are described above and elsewhere in this Prospectus.
Factors influencing the extent of losses following the occurrence of a Credit Event
The Auction Final Price or Final Price (in circumstances where there is no Auction Final Price) in respect of
a Reference Entity (where a Credit Event and resulting Event Determination Date has occurred) will be
determined by the valuation of the Reference Obligation, or other obligations, of such Reference Entity
(together, as used in these Risk Factors, “Valuation Obligations”). Such valuations will be a key factor
determining the extent to which losses are suffered by Noteholders as a result of Credit Events occurring in
respect of Reference Entities under the Credit Default Swap Transactions.
Such Valuation Obligations may have no, or only a limited, trading market. The liquidity of Valuation
Obligations will generally fluctuate with, among other things, the underlying liquidity of the loan and bond
markets, the conditions of the financial markets, general economic conditions, domestic and international
political events, developments or trends in a particular industry and the financial condition of the relevant
Reference Entity. Some or all of the Valuation Obligations may also be subject to restrictions on transfer and
may be considered illiquid. If an Event Determination Date occurs in respect of a Reference Entity, any
resulting reduction in market value of the related Valuation Obligations could be further magnified by reason
of such limited liquidity for those Valuation Obligations.
Any quotations used in the calculation of the Final Price (where an Auction Final Price is not applicable and
the Fallback Settlement Method applies as a result) may be affected by factors other than the occurrence of
the Credit Event. Such prices may vary widely from dealer to dealer and substantially between Valuation
Dates. The obligations selected for valuation following a Credit Event may be illiquid and such illiquidity
may be expected to be more pronounced following the occurrence of such Credit Event, thereby adversely
affecting any determination of the value of such obligation which in turn will reduce the Credit Suisse Cash
Settlement Amount determined in respect of each Class of Notes and the amount actually payable in partial
redemption of such Class of Notes as a result of such Credit Event.
Following an Event Determination Date, if the Fallback Settlement Method applies, the Swap Counterparty
is entitled to select an obligation of the Reference Entity for valuation which has the lowest value in the
market at the relevant time – providing such obligation satisfies certain specifications and limits for
qualification as a Reference Obligation. It is likely that the obligations selected in these scenarios will be
obligations of the Reference Entity with the lowest market value that satisfies such specification and limits
for qualification as a Reference Obligation. This could result in a lower recovery value of the Reference
Obligations and hence, greater losses for investors of the Notes than would otherwise be the case.
40
Where an Auction Final Price Determination Date occurs, the Auction Final Price will be determined
according to an auction procedure set out in the relevant Credit Derivatives Auction Settlement Terms,
available on ISDA’s website at www.isda.org (or any successor website thereto). Prospective investors
should note that the relevant CDDC has the power to make binding decisions on critical issues such as
whether a Credit Event has occurred, which obligations are to be valued and whether an Auction should take
place in accordance with and as more fully described in the Credit Derivatives Determinations Committees
Rules, as amended from time to time and available on ISDA’s website at www.isda.org (or any successor
website thereto). Consequently, Credit Suisse International, the Issuer and the Noteholders will be bound by
any such relevant decisions.
Risks relating to asset package delivery
The 2014 ISDA Credit Derivatives Definitions published by ISDA introduced the concept of asset package
delivery. In circumstances where “Financial Reference Entity Terms” and “Governmental Intervention”
applies in respect of a Reference Entity and there is (i) a Governmental Intervention Credit Event; or (ii) a
Restructuring Credit Event in respect of the Reference Obligation where such Restructuring does not
constitute a Governmental Intervention, then a related asset package resulting from a prior deliverable
obligation may also be deliverable. The asset package would be treated as having the same outstanding
principal as the corresponding prior deliverable obligation or package observable bond.
If the resulting asset package is deemed to be zero where there are no resulting assets, the related credit loss
will be 100 per cent. notwithstanding the recovery value on any other obligations of the Reference Entity.
If an asset in the asset package is a non-transferable instrument or non-financial instrument, the value of such
asset will be the market value determined by reference to a specialist valuation or in accordance with
methodology determined by the CDDC.
Noteholders will not be able to refer questions to the CDDCs
Noteholders, in their capacity as holders of the Notes, will not have the ability to refer questions to a CDDC.
As a result, Noteholders will be dependent on other market participants to refer specific questions to the
CDDCs that may be relevant to the Noteholders. Credit Suisse International, in any capacity, has no duty to
the Noteholders to refer specific questions to the CDDCs.
Noteholders will have no role in the composition of the CDDCs
Separate criteria will apply to the selection of dealer and non-dealer institutions to serve on the CDDCs, and
Noteholders will have no role in establishing such criteria. In addition, the composition of the CDDCs will
change from time to time in accordance with the Rules, as the term of a member institution may expire or a
member institution may be required to be replaced. Noteholders will have no control over the process for
selecting institutions to participate on the CDDCs and, to the extent provided for in the Notes, will be subject
to the determinations made by such selected institutions in accordance with the Rules.
Noteholders will have no recourse against either the institutions serving on the CDDCs or the external
reviewers
Institutions serving on the CDDCs and the external reviewers, among others, disclaim any duty of care or
liability arising in connection with the performance of duties or the provision of advice under the Rules,
except in the case of gross negligence, fraud or wilful misconduct. Furthermore, the member institutions of
the CDDCs from time to time will not owe any duty to the Noteholders, and the Noteholders will be
prevented from pursuing legal claims with respect to actions taken by such member institutions under the
Rules.
Noteholders should also be aware that member institutions of the CDDCs have no duty to research or verify
the veracity of information on which a specific determination is based. In addition, the CDDCs are not
41
obligated to follow previous determinations and, therefore, could reach a conflicting determination for a
similar set of facts.
Noteholders will be responsible for obtaining information relating to deliberations of the CDDCs
Notices of questions referred to the CDDCs, meetings convened to deliberate such questions and the results
of binding votes of the CDDCs will be published on the website of ISDA and none of the Issuer or Credit
Suisse International, in any capacity, shall be obliged to inform Noteholders of such information, other than
as expressly provided in the terms of the Notes. Any failure by Noteholders to be aware of information
relating to determinations of a CDDC will have no effect under the Notes and Noteholders are solely
responsible for obtaining any such information.
Correlation amongst Reference Entities
The correlation of defaults or Credit Events amongst Reference Entities may affect the potential losses to the
Noteholders. The higher the correlation of defaults or Credit Events, the higher the probability that a Credit
Event will occur for more than one Reference Entity, increasing the losses to Noteholders.
Potential investors must note that all of the Reference Entities are banks. To the extent that a Credit Event
occurs in respect of one Reference Entity therefore, there is a significant likelihood that Credit Events will
occur in respect of the other Reference Entities. In such circumstances the Notes may suffer substantial
losses which reduce or eliminate their value; further, all or the majority of such losses may be sustained over
a relatively short period of time.
Furthermore, as Credit Suisse International is also a bank, there is likely to be a high correlation between
defaults by Credit Suisse International in any of its capacities in respect of the Notes (including, without
limitation as Swap Counterparty) and the occurrence of Credit Events in respect of the Credit Default Swap
Transactions. Accordingly, Noteholders may suffer greater losses (and may be more likely to suffer losses)
as a result of such correlation than they may otherwise have done had the Reference Entities not operated in
the same industry as Credit Suisse International.
Idiosyncratic Risk, Recovery Rates
Individual or unsystematic risks, such as those pertaining to only one Reference Entity, could lead to an
increase in the likelihood of a Credit Event occurring in relation to such Reference Entity.
Recovery rates for Reference Entities that have suffered Credit Events can and do vary, often widely, from
entity to entity, even where such entities operate in the same industry, and from time to time. Lower recovery
rates means that losses suffered by Noteholders will be higher. Higher default rates are correlated with lower
recovery rates.
Furthermore, the occurrence of a Credit Event under the Credit Default Swap Transactions and the recovery
rates for the obligations of the Reference Entity in respect of which such Credit Event occurs may be subject
to the operation of bankruptcy or other insolvency laws in the jurisdiction applicable to such Reference
Entity.
No requirement for exposure to Reference Entities
Notwithstanding the above, the performance of the Notes is not conditional upon the Swap Counterparty
sustaining or being exposed to any risk or loss and the rights and obligations of the Swap Counterparty in
respect of the Credit Default Swap Transactions are not, at any time, dependent upon the Swap Counterparty
owning or having any legal, equitable or other interest in, or indirect exposure to, any of the Reference
Entities referenced in the Credit Default Swap Transactions from time to time, nor shall the Swap
Counterparty have any obligation to purchase or hold a Reference Entity’s obligations at any time.
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The Credit Support Annex
As part of the Swap Agreement, the Issuer and Credit Suisse International have entered into a Credit Support
Annex as described in more detail in the section of this Prospectus entitled “Transaction Description” under
the heading “The Credit Support Annex”.
The Swap Counterparty shall act for its own benefit and is not required to, and may not, take into account the
interests of the Noteholders in determining what Eligible Cash and/or Eligible Securities, meeting the
required criteria, to deliver to the Issuer under the Credit Support Annex.
While at the time of delivery, any Eligible Cash and/or Eligible Securities delivered to the Issuer by the
Swap Counterparty under the Credit Support Annex are required to have a value equal to the exposure the
Issuer has to the Swap Counterparty under the Swap Agreement, and notwithstanding the fact that such
valuations will be conducted on a weekly basis, there can be no assurance that any amount realised from
Eligible Cash and/or the sale of Eligible Securities delivered and held by the Issuer will be equal to the
amount otherwise payable by the Swap Counterparty as a result of the termination of the Swap Agreement.
Accordingly, despite the existence of the Credit Support Annex, in the event that the Swap Agreement
terminates as a result of a default by the Swap Counterparty under the Swap Agreement, or the occurrence of
certain insolvency or bankruptcy events relating to the Swap Counterparty, any failure by the Swap
Counterparty to pay any termination amount due under the Swap Agreement, there is a significant possibility
that the Issuer will suffer a shortfall on the realisation of its assets and that the amount payable to
Noteholders may be reduced, even to zero, in connection with the redemption of the Notes in such
circumstances.
Early Redemption
If a Class of Notes are due to redeem early in full as a result of an Early Redemption Event (for example
following certain tax events (subject to certain exceptions including, but not limited to, where withholding or
deduction of taxes on the Notes arises solely in respect of FATCA), a termination of the Equity Swap
Transaction and the Credit Default Swap Transaction relating to such Class (or a termination of the Swap
Agreement as a whole), as a result of an Event of Default by the Issuer or as a result of the enforcement of
the security by the Trustee at its discretion or if directed by the Noteholders of the other Class of Notes), the
Swap Agreement attributable to such Class will terminate.
Prospective investors in each Class of Notes must note that a Class may be redeemed early as a result of the
enforcement of the security by the Trustee in respect of the other Class. The early redemption of the Notes of
all Classes may not be triggered at the same time unless the security is enforced.
Any amount payable to the Issuer by the Swap Counterparty as a consequence of the termination of the Swap
Agreement, together with any Eligible Cash and/or sale proceeds of any Eligible Securities, shall first be
used to pay any amount due to the Trustee, the Disposal Agent, the Custodian and any other Agent of the
Issuer, including costs and expenses incurred with the sale of such securities.
The remainder of any such amount received by the Issuer in respect of termination of the Swap Agreement
and any remaining Eligible Cash and/or proceeds of sale of Eligible Securities shall be applied in satisfaction
of the amounts due to Noteholders on a pro rata basis.
There can be no assurance as to the value of any Eligible Securities at the time of such sale and the amounts
realised may be significantly lower than the face value of such Eligible Securities and may even be zero. To
the extent that the value of the Eligible Cash and/or Eligible Securities is less than the value of the Swap
Agreement upon its termination, Noteholders will be exposed to the Swap Counterparty for the shortfall.
None of the Issuer, the Trustee, the Disposal Agent, any other Agent, the Dealer or any other person is under
any obligation to obtain a particular price in connection with such a sale and shall have no responsibility or
liability to any Noteholder for the price at which any such assets are sold.
43
Accordingly, the amount payable to Noteholders on an early redemption of their Notes may be significantly
lower than their initial investment and may even be zero.
Replacement of the Swap Counterparty
Investors should note that upon the occurrence of (i) certain insolvency events with respect to the Swap
Counterparty (a “Counterparty Bankruptcy Credit Event”); or (ii) an Event of Default (as defined in the
Swap Agreement) with respect to the Swap Counterparty (other than a Counterparty Bankruptcy Credit
Event); or (iii) a Termination Event (as defined in the Swap Agreement) where the Issuer has the right to
designate an Early Termination Date in respect of the Credit Default Swap Transactions (a “CDS
Termination Event”); or (iv) a Termination Event (as defined in the Swap Agreement) where the Issuer has
the right to designate an Early Termination Date in respect of any Equity Swap Transaction (an “Equity
Swap Termination Event”); or (v) the long term senior, unsecured rating assigned by Moody’s Investors
Service Limited (“Moody’s”) to the Swap Counterparty being withdrawn or is less than Ba1 or if the short
term rating assigned by Moody’s to the Swap Counterparty is less than P-3 (any such downgrade or
withdrawal, a “Moody’s Ba1/P-3 Downgrade” and such event, along with each of a Counterparty
Bankruptcy Credit Event, an Event of Default with respect to the Swap Counterparty (other than a
Counterparty Bankruptcy Event), a CDS Termination Event and an Equity Swap Termination Event, a
“Replacement Event”), Garantum Fondkommission AB (or any successor entity thereto) (as Noteholder
Facilitator) has the right, by notice to the Issuer with a copy to the Trustee (and, provided that, in the case of
a Moody’s Ba1/P-3 Downgrade only that the Swap Counterparty has given its prior written consent to such
replacement) to select a replacement Swap Counterparty from (and including) the date of the occurrence of
such a Replacement Event up to (and including) the date falling 30 calendar days from the occurrence of the
applicable Replacement Event.
Accordingly, where the Noteholder Facilitator makes such a selection, and provided certain other
requirements are met, it is possible that the identity of the Swap Counterparty will change, and accordingly,
the credit exposure of the Issuer and Noteholders to the Swap Counterparty may also change. As this right
may be exercised whenever a Replacement Event occurs, the identity of the Swap Counterparty may change
more than once during the duration of the Notes. Furthermore, it is possible that the Swap Counterparty in
respect of the Credit Default Swap Transactions may be different from the Swap Counterparty in respect of
the Equity Swap Transactions or any of them.
However, notwithstanding the above, no assurance can be given that a replacement Swap Counterparty will
be identified by the Noteholder Facilitator upon the occurrence of a Replacement Event or that such
replacement will be completed.
The replacement of the Swap Counterparty as described above may prevent an early termination of the Swap
Agreement and therefore the early redemption of the Notes. However, even if such replacement is made, the
Notes may still redeem early, in full, on some later date as a result of the occurrence of any Early
Redemption Event and Noteholders will also still be exposed to the risk of Credit Events in respect of the
Credit Default Swap Transactions, notwithstanding such replacement of the Swap Agreement (including, for
the avoidance of doubt, where such Credit Events occurred prior to such replacement). The value of the
Swap Agreement to the Issuer may have been higher at the time of the occurrence of the Replacement Event
than as at the time of any subsequent early redemption of the Notes. As a result, the replacement of the Swap
Counterparty in such circumstances may result in Noteholders receiving less in respect of their investment
than they may otherwise have done if no replacement Swap Counterparty had been selected and had the
Notes redeemed early as a result of such Swap Counterparty Event or, as the case may be, a Counterparty
Bankruptcy Credit Event.
As a result of the risk highlighted in the preceding paragraph, the inclusion of this right of replacement may
mean that the value of the Notes from time to time may be lower than their value would otherwise have been
had no such replacement right been included.
If a replacement Swap Agreement is not entered into within 30 calendar days following the occurrence of a
Replacement Event (other than a Moody’s Ba1/P3 Downgrade), the Swap Agreement shall automatically
44
terminate or, in the case or, in the case of a Termination Event (as defined in the Swap Agreement) the
relevant Credit Default Swap Transaction and/or Equity Swap Transaction(s) may be terminated in
accordance with the terms of the Swap Agreement and, if a Swap Termination Event has occurred and no
Early Redemption Trigger Date or Early Redemption Event has occurred pursuant to any other applicable
Condition, the Issuer shall, as soon as is practicable (or, in any case, within two Reference Business Days
after the end of the Replacement Period), give an Early Redemption Notice to the Noteholders (the date on
which such Early Redemption Notice is deemed to have been given shall be an “Early Redemption Trigger
Date”) and the Notes shall become due and payable on the related Early Redemption Date. Certain risks
associated with early redemption of the Notes are discussed above under “Early Redemption”.
Instructions to the Trustee following an Event of Default or an Enforcement Event
In respect of a Class of Notes, while the Trustee is permitted to give notice to the Issuer of its determination
that an Event of Default (in respect of such Class or both Classes, as applicable) has occurred (and that
accordingly such Class of Notes have become immediately due and payable) and to determine that an
Enforcement Event has occurred and enforce the security, it is not required to do so, unless directed by an
Extraordinary Resolution passed by the Noteholders of such Class (or both Classes, as applicable) to do so
and will only do so if the Trustee is indemnified and/or secured and/or prefunded to its satisfaction. The
Swap Counterparty also has the right to direct the Trustee in writing to enforce security.
Accordingly, following (i) the occurrence of an Event of Default, the Trustee may accelerate the relevant
Class of Notes at its discretion, but shall be obliged to accelerate if directed by an Extraordinary Resolution
passed by the Noteholders of such Class (or both Classes, as applicable) (subject, in each case, to its being
indemnified and/or secured and/or prefunded to its satisfaction), by giving notice to the Issuer that an Event
of Default has occurred and that such Class of Notes have become immediately due and payable and then, if
required enforce the security; and (ii) the Trustee becoming aware of the occurrence of an Enforcement
Event, the Trustee may enforce the security at its discretion but shall enforce the security if directed by an
Extraordinary Resolution passed by the Noteholders of such Classes (or both Classes, if applicable) or if
directed in writing by the Swap Counterparty (subject, in each case, to its being indemnified and/or secured
and/or prefunded to its satisfaction). Noteholders of each Class should be aware that there is no assurance
that the Trustee would exercise such discretion in circumstances where an Event of Default or Enforcement
Event occurs. Even if the Trustee is willing to exercise such discretion or the Noteholders of a Class validly
pass an Extraordinary Resolution (as described below) directing the Trustee to accelerate such Class of
Notes or, as the case may be, enforce the security, the Trustee shall only do so if it is indemnified and/or
secured and/or prefunded to its satisfaction. There may be a significant delay between the occurrence of an
Event of Default or, as the case may be, the occurrence of an Enforcement Event (and, in the case of an
Event of Default, the Trustee’s notice to the Issuer that the relevant Class of Notes have become immediately
due and payable) and any enforcement of the security following the occurrence of such Event of Default or,
as the case may be, such Enforcement Event as a consequence of, among other things, a delay in the Trustee
receiving satisfactory indemnities and/or prefunding in circumstances where the Noteholders of such Class
(or both Classes, if applicable) have directed the Trustee to accelerate and/or enforce. During the period of
such delay, Noteholders’ pro rata share of the proceeds of enforcement of the security may decrease
substantially from what it would otherwise have been but for such delay and may in certain circumstances be
zero. Noteholders of a Class may direct the Trustee by an Extraordinary Resolution with respect to an Event
of Default or an Enforcement Event which solely affects such Class, and Noteholders of both Classes may
direct the Trustee by an Extraordinary Resolution with respect to an Event of Default or an Enforcement
Event which affects the Notes generally.
Upon the occurrence of an Event of Default in respect of a Class of Notes, Noteholders of such Class (or
both Classes, as applicable), by passing an Extraordinary Resolution, will be entitled to direct the Trustee to
give an Early Redemption Notice to the Issuer and, if necessary, direct the Trustee to enforce the security
following such Event of Default, provided that in each case, the Trustee shall only do so if it is also
indemnified and/or secured and/or prefunded to its satisfaction. Such Extraordinary Resolution if passed by
way of a signed written resolution or given by way of electronic consents through the clearing systems
(where the Notes are held on behalf of a Clearing System) must be passed by Noteholders of such Class such
holding, in aggregate, at least 75% in principal amount of all of the outstanding Notes of such Class or, if
45
applicable, by Noteholders holding, in aggregate, across the Class A Notes and the Class B Notes, at least
75% in principal amount of all of the outstanding Notes. Given the wide distribution of the Notes,
Noteholders should be aware that there may be a significant delay between the Noteholders becoming
entitled to make such a direction to the Trustee and Noteholders holding a sufficient nominal amount of the
Notes being able to make such request and provide the required indemnification, security and/or prefunding
to the Trustee. Accordingly, during the period of such delay, Noteholders’ pro rata share of the proceeds of
enforcement of the security may decrease substantially from what it would otherwise have been but for such
delay and may in certain circumstances be zero.
Payments of Commissions to the Distributor
Commissions will be paid to the Distributor during the life of the Notes on the fifth Business Day following
each of 30 December 2015, 30 December 2016, 30 December 2017, 30 December 2018, 30 December 2019
and 30 December 2020 (each such day being an “Annual Determination Date”). These commissions will
be funded by the aggregate of (a) the value associated with the effective annual reduction in the Class
Notional Amount and the Reference Entity Notional Amounts under each Credit Default Swap Transaction
and the Swap Notional Amount under each Equity Swap Transaction through the application of the Fee
Calculation Factor and (c) the Performance Fee deducted in the calculation of any Swap Counterparty Equity
Final Exchange Amount receivable by the Issuer under the Equity Swap Transaction. Such Performance Fee
depend, in part, on the performance of the relevant Class Equity Basket referenced by the Equity Swap
Transaction relating to such Class of Notes.
Notwithstanding the above, the Dealer and the Distributor have agreed that if any portion of the Notes is held
by the Dealer and/or any of its affiliates, the amount required to be paid to the Distributor will be reduced by
the proportion which such portion of Notes held by the Dealer and/or its affiliates bears to all of the
outstanding Notes.
Payments of Commissions to the Distributor – Credit Default Swap
Each of the Class Notional Amount and the Reference Entity Notional Amounts under each Credit Default
Swap Transaction is effectively reduced by approximately 1% annually through the application of the Fee
Calculation Factor. Accordingly, any amounts due to the Issuer under each Credit Default Swap Transaction
from the Swap Counterparty will be reduced by the application of the Fee Calculation Factor. This means
that any such amount payable will be multiplied by the Fee Calculation Factor (which will be 100% on the
Issue Date and will decrease to 94.60% on the Maturity Date of the Notes (or lower following the Scheduled
Maturity Date), as determined in the manner set out in the Swap Agreement).
The amounts payable to the Issuer will therefore be less than the amounts which would otherwise have been
payable if such Fee Calculation Factor had not been applied. There is no assurance that investors will
receive 100% of the amount invested in any Class of Notes, which will be dependent on, among other things,
the performance of the relevant Class Equity Basket and the resulting Swap Counterparty Equity Final
Exchange Amount payable to the Issuer under the Equity Swap Transaction. Such Swap Counterparty Equity
Final Exchange Amount (the calculation of which takes into account the relevant Fee Calculation Factor that
is applied and the Performance Fee that is payable in respect of any such Class of Notes) will determine the
Additional Payout Amount. Investors will rely on the Additional Payout Amount payable under the relevant
Class of Notes to make up for such shortfall resulting from application of such Fee Calculation Factor.
Payments of Commissions to the Distributor - Notes
The Additional Payout Amount (if any) payable under each Class of Notes takes into account the payment of
commissions to the Distributor by effectively reducing the Swap Notional Amount of each Equity Swap
Transaction through the application of the Fee Calculation Factor (which will be 94.60% on the Scheduled
Maturity Date or lower following the Scheduled Maturity Date) and deducting a Performance Fee in the
calculation of the applicable Swap Counterparty Equity Final Exchange Amount, which is calculated for
each Class of Notes and which is dependent, in part, on the performance of the Class Equity Basket
referenced by the Equity Swap Transaction relating to such Class of Notes. To receive at least 100% of the
46
amount invested in any Class of Notes, an investor is reliant upon an Additional Payout Amount being
payable under such Class of Notes after the application of the relevant Fee Calculation Factor and deduction
of the Performance Fee in the calculation of the such Swap Counterparty Equity Final Exchange Amount.
A Performance Fee will only be payable in respect of a Class of Notes where the Swap Counterparty Equity
Final Exchange Amount (prior to the deduction of the Performance Fee in its calculation) payable to the
Issuer under the Equity Swap Transaction relating to that Class exceeds 5.4% of the Aggregate Nominal
Amount of such Class. In such cases, the Performance Fee payable in respect a Class is equal to 10% of such
amount by which the Swap Counterparty Equity Final Exchange Amount (prior to the deduction of such
Performance Fee in its calculation) receivable by the Issuer under the Equity Swap Transaction relating to
that Class exceeds 5.4% of the Aggregate Nominal Amount of such Class.
Therefore, the application of the relevant Fee Calculation Factor and the deduction of any Performance Fee
in the calculation of the Swap Counterparty Equity Final Exchange Amount receivable in respect of the
Equity Swap Transaction referencing the relevant Class Equity Basket when calculating the Additional
Payout Amount (if any) payable under such Class will result in a lower Additional Payout Amount than had
such commissions referred to above not been payable and may adversely affect an investor’s ability to
recover the amount invested in the Notes and may substantially reduce any Additional Payout Amount.
The Performance Fee and the application of the Fee Calculation Factor are described more fully in the
sections of this Prospectus entitled “Transaction Description” and the “Issue Terms”.
Evolution of international fiscal policy
Luxembourg has concluded a number of double taxation treaties with other member states. It may be
necessary or desirable for the Company to seek to rely on such treaties particularly in respect of income and
gains of the Issuer. Whilst each double taxation treaty needs to be considered individually taking into
account fiscal practices primarily of the country from whom relief is sought a number of requirements need
to be met. These requirements may include ensuring that an entity is resident in Luxembourg, is subject to
taxation there on income and gains and is also beneficially owner of such income and gains. Fiscal policy
and practice is constantly evolving and at present the pace of evolution has been quickened due to a number
of developments which include, but are not limited to, the Organisation for Economic Co-operation and
Development (“OECD”) base erosion and profit shifting project. Fiscal policy may change which may or
may not be accompanied by a formal announcement by any fiscal authority or the OECD. As a result, there
can be no certainty that the Company will be able to rely on double tax treaties because fiscal practice of the
construction of double tax treaties and the operation of the administrative processes surrounding those
treaties may be subject to change. For example, fiscal practice could evolve such that the Company could be
regarded as not being the beneficial owner because the overriding commercial object of the Company to
allocate income and gains, less certain expenses and losses for the benefit of Noteholders, and the Company
is entitled to a tax deduction in respect of that allocation and, as such, the Company would not be able to rely
on a double taxation treaty on its own behalf.
FATCA and the possibility of U.S. withholding tax on payments
Background
The foreign account tax compliance provisions of the Hiring Incentives to Restore Employment Act of 2010
impose a withholding tax of 30 per cent. on (i) certain U.S. source payments and (ii) payments of gross
proceeds from the disposition of assets that produce U.S. source dividends or interest, in either case made to
persons that fail to meet certain certification or reporting requirements. To avoid withholding under
“FATCA” (as defined in Master Condition 1(a) (Definitions)), a non-U.S. financial institution (“FFI”) must
enter into an agreement with the IRS (an “IRS Agreement”) (as described below) or otherwise be exempt
from the requirements of FATCA. Non-U.S. financial institutions that enter into IRS Agreements or become
subject to provisions of local law (“IGA legislation”) intended to implement an intergovernmental
agreement entered into pursuant to FATCA (“IGAs”), may be required to identify “financial accounts” held
by U.S. persons or entities with substantial U.S. ownership, as well as accounts of other financial institutions
that are not themselves participating in (or otherwise exempt from) the FATCA reporting regime. In addition,
47
in order (a) to obtain an exemption from FATCA withholding on payments it receives or (b) to comply with
any applicable IGA legislation, a financial institution that enters into an IRS Agreement or is subject to IGA
legislation may be required to (i) report certain information on its U.S. account holders to the government of
the United States or another relevant jurisdiction and (ii) withhold 30 per cent. from all, or a portion of,
certain payments made to persons that fail to provide the financial institution information, consents and
forms or other documentation that may be necessary for such financial institution to determine whether such
person is compliant with FATCA or otherwise exempt from FATCA withholding.
Under FATCA, withholding is required with respect to payments to persons that are not compliant with
FATCA or that do not provide the necessary information, consents or documentation, where such payments
are made on or after (i) July 1, 2014 in respect of certain U.S. source payments, (ii) January 1, 2017, in
respect of payments of gross proceeds (including principal repayments) on certain assets that produce U.S.
source interest or dividends and (iii) January 1, 2017 (at the earliest) in respect of “foreign passthru
payments”, provided that for “obligations” that are not treated as equity for U.S. federal income tax purposes,
FATCA withholding will only apply to such obligations that are issued or materially modified on or after (a)
July 1, 2014 or (b) the date that is six months after the date on which the final regulations defining “foreign
passthru payments” are filed with the Federal Register in the case of an obligation that would only be subject
to FATCA withholding to the extent payments on such obligation were treated as “foreign passthru
payments”.
The application of FATCA to interest, principal or other amounts paid with respect to the Notes, the
Collateral (if any) and the Swap Agreement (if any) and the information reporting obligations of the
Company or the Issuer, as appropriate, and other entities in the payment chain is still developing. In
particular, a number of jurisdictions (including Luxembourg) have entered into IGAs with the United States,
which modify the way in which FATCA applies to their jurisdictions. The full impact of such IGAs and IGA
legislation thereunder on reporting and withholding responsibilities under FATCA is unclear. The Company
or the Issuer, as appropriate, and other entities in the payment chain may be required to report certain
information on their U.S. account holders to government authorities in their respective jurisdictions or the
United States in order (i) to obtain an exemption from FATCA withholding on payments they receive or (ii)
to comply with applicable law in their jurisdiction. It is not yet certain how withholding on “foreign passthru
payments” will be dealt with under the IGAs or if such withholding will be required at all.
Possible impact on Payments on Collateral (if any) and Swap Agreement (if any)
If the Company or the Issuer, as appropriate, fails to comply with its obligations under FATCA (including
the Luxembourg IGA and any IGA legislation thereunder), it may be subject to FATCA withholding on all,
or a portion of, payments it receives with respect to the Collateral (if any) or the Swap Agreement (if any).
Any such withholding would, in turn, result in the Issuer having insufficient funds from which to make
payments that would otherwise have become due in respect of the Notes or Swap Agreement (if any) with
respect to a Series. No other funds will be available to the Issuer to make up any such shortfall and, as a
result, the Issuer may not have sufficient funds to satisfy its payment obligations to Noteholders.
Additionally, if payments to the Issuer in respect of its assets, including the Collateral (if any), are, will
become or are deemed on any test date to be subject to FATCA withholding, the Notes will be subject to
early redemption (See “Early redemption for Events of Default, tax or other reasons” below). No assurance
can be given that the Company or the Issuer, as appropriate, can or will comply with its obligations under
FATCA or that the Company or the Issuer, as appropriate, will not be subject to FATCA withholding.
Possible impact on payments on the Notes
The Issuer expects to require (and expects other intermediaries through which Notes are held to require) each
Noteholder to provide certifications and identifying information about itself and its owners (or beneficial
owners) in order to enable the Issuer (or such an intermediary) to identify and report on the Noteholder and
certain of the Noteholder's direct and indirect U.S. beneficial owners to the IRS or another applicable
authority. The Issuer may also be required to withhold amounts from Noteholders (including intermediaries
through which such Notes are held) that are FFIs that are not compliant with, or exempt from, FATCA or
Noteholders that do not provide the information, documentation or certifications required for the Issuer to
48
comply with its obligations under FATCA. Additionally, the Issuer is also permitted to make any
amendments to the Notes and the Swap Agreement (if any) as may be necessary to enable the Issuer to
comply with its obligations under FATCA (including the Luxembourg IGA and any IGA legislation
thereunder) and any such amendment will be binding on the Noteholders.
Neither a Noteholder nor a beneficial owner of Notes will be entitled to any additional amounts in the event
FATCA withholding tax is imposed on any payments on or with respect to the Notes. As a result,
Noteholders may receive less interest or principal, as applicable, than expected.
FATCA IS PARTICULARLY COMPLEX AND ITS APPLICATION TO THE COMPANY, THE ISSUER,
THE NOTES AND NOTEHOLDERS IS SUBJECT TO CHANGE. EACH NOTEHOLDER SHOULD
CONSULT ITS OWN TAX ADVISER TO OBTAIN A MORE DETAILED EXPLANATION OF FATCA
AND TO LEARN HOW FATCA MIGHT AFFECT SUCH NOTEHOLDER IN LIGHT OF ITS
PARTICULAR CIRCUMSTANCES.
Recent Global Events
General
Since mid-2007, the global economy and financial markets have experienced extreme levels of instability.
The initial trigger for the instability was a downturn in the U.S. housing market. Significant declines in house
prices in the U.S. from early 2005, combined with interest rate rises, led to increases in mortgage default
levels, particularly in relation to mortgages granted to sub-prime borrowers (that is borrowers with a poor or
no credit history). Financial exposure to such mortgage assets had been widely distributed on a global basis
via securitisations and other risk transfer mechanisms. As a result, a significant number of global commercial
banks, investment banks, government-sponsored entities, hedge funds, structured investment vehicles and
institutional investors had gained exposure to defaults in respect of such mortgage assets. By mid-2007,
concerns about the value of mortgage assets held by these entities led to a general tightening of available
credit and liquidity in the global financial markets.
During 2008, the initial instability intensified into a severe global financial crisis. Notwithstanding steps
taken by the central banks of the U.S., the U.K. and certain other countries and the European Central Bank to
increase liquidity, continued disruption to the credit and liquidity markets and concerns about the value of
mortgage assets and credit-related products generally, led to substantial write-downs of asset values by a
number of institutions, including government-sponsored entities, insurers and major commercial and
investment banks. These write-downs caused many such entities to seek additional capital, to merge with
other institutions and, in some cases, to go into insolvency or to be the subject of government bail-out.
In September 2008, the crisis saw a series of collapses of government-sponsored entities, insurers and major
commercial and investment banks around the world. These collapses included the bail-out by the U.S.
government of the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National
Mortgage Association (Fannie Mae), the insolvency of investment bank Lehman Brothers Holdings Inc., the
bail-out by the U.S. government of the major U.S. insurer American International Group, Inc., and numerous
other rescues and bail-outs in other countries.
In response to the crisis various governments and central banks took substantial measures to ease liquidity
problems and enacted fiscal stimulus packages and measures to support certain entities affected by the crisis.
Such measures included establishing special liquidity schemes and credit facilities, bank recapitalisation
programmes and credit guarantee schemes.
In an attempt to counteract recessionary pressures, the central banks of the U.S., the U.K. and certain other
countries and the European Central Bank also lowered interest rates, in some cases to record low levels.
A number of countries have accumulated significant levels of public debt both absolutely and relative to
GDP. In connection with this, the global economy and financial markets have further experienced levels of
49
instability and crises, in particular in respect of certain countries that had adopted the Euro (the “Eurozone
Countries”), such as Greece, Italy, and Spain. This has led to concerns in relation to the sovereign credit risk
of other Eurozone economies, as well as to the survival of the euro itself, and it is possible that the structure,
nature and regulation of financial markets, including sovereign credit markets, may be fundamentally altered.
A number of Eurozone countries have seen yields on new issues of sovereign debt increase to levels that
some commentators have argued are not sustainable. Such increases, combined with existing levels of
national debt, have given rise to ongoing concerns of the ability of such Eurozone countries to service their
existing debt obligations. Furthermore, Greece restructured a majority of its sovereign debt in the first half of
2012.
2012 saw dialogue among the Eurozone Countries regarding, among other things, the control of fiscal policy,
the operation of the European Central Bank, the structuring of the European Financial Stability Facility and
the establishment of the European Stability Mechanism. During this time several rating agencies have
downgraded a number of Eurozone Countries, including Spain, by one or more notches.
The ongoing concerns regarding the Eurozone Countries, including the possibility of a withdrawal from the
Euro by one or more Eurozone Countries or a wider restructuring of the Euro, are likely to continue to effect
the financial condition and stability of individual Eurozone Countries and, more widely, the European Union
and the global economy.
The above factors have also led to substantial volatility in markets across asset classes, including (without
limitation) stock markets, foreign exchange markets, fixed income markets and credit markets.
There can be no assurance that the steps taken by governments to ameliorate the global financial crisis will
be successful or that the global recovery will continue. The structure, nature and regulation of financial
markets in the future may be fundamentally altered as a consequence of the global financial crisis, possibly
in unforeseen ways. There can be no assurance that similar or greater disruption may not occur in the future
for similar or other reasons. In addition, the attempts being taken to reduce the high level of sovereign debt
may themselves contribute to a further global recession.
There can be no assurance as to how severe the global recession will be or as to how long it will last. There
can be no assurance that government actions to limit the impact of the crisis will be successful and that they
will not instead lead or contribute to a deeper and/or longer-lasting recession. Economic prospects are
subject to considerable uncertainty.
Prospective investors should ensure that they have sufficient knowledge and awareness of the global
financial crisis and the responses thereto and of the economic situation and outlook as they consider
necessary to enable them to make their own evaluation of the risks and merits of an investment in the Notes.
In particular, prospective investors should take into account the considerable uncertainty as to how the global
financial crisis and the wider economic situation will develop over time.
Any person who had held securities during the periods considered above, particularly structured securities,
would be highly likely to have suffered significant adverse effects as a result of such holding, including, but
not limited to, major reductions in the value of those securities and a lack of liquidity. Prospective investors
should consider carefully whether they are prepared to take on similar risks by virtue of an investment in the
Notes.
Impact on Liquidity
The events outlined above have had an extremely negative effect on the liquidity of financial markets
generally and in the markets in respect of certain financial assets or in the obligations of certain obligors.
This has particularly been the case with respect to the market for structured assets and the obligations of
financial institutions and certain sovereigns. Such assets may either not be saleable at all or may only be
saleable at significant discounts to their estimated fair value or to the amount originally invested. No
assurance can be given that liquidity in the market generally, or in the market for any particular asset class or
50
in the obligations of any particular financial institution or sovereign, will improve or that it will not worsen
in the future. Such limited liquidity may have a negative impact on the value of the Notes and the theoretical
value of the shares references in the relevant Class Equity Basket (which, in turn, may have a negative
impact on the value of the Equity Swap Transactions) and any Eligible Cash and/or Eligible Securities
delivered pursuant to the Credit Support Annex and the valuation of any obligations of a Reference Entity
following a Credit Event. In particular, should the Notes be redeemed early, Noteholders will be exposed to
the liquidation value of the Swap Agreement and any Eligible Cash and/or Eligible Securities delivered
pursuant to the Credit Support Annex which value might be affected (in some cases significantly) by such
lack of liquidity and lower valuations on obligations of Reference Entities in respect of which Credit Events
have occurred.
Impact on Credit
The events outlined above have negatively affected the creditworthiness of a number of entities, in some
cases to the extent of collapse or requiring government rescue. Such credit deterioration has and may
continue to be widespread and is no longer confined to the financial services sector. The value of the Notes
or of the amount of payments under them may be negatively affected by such widespread credit
deterioration. Prospective investors should note that recoveries on assets of affected entities have in some
cases been de minimis and that similarly low recovery levels may be experienced with respect to other
entities in the future which may include the Reference Entities and any Eligible Cash and/or Eligible
Securities delivered pursuant to the Credit Support Annex.
Impact of Increased Regulation and Nationalisation
The events since 2007 have seen increased involvement of governmental and regulatory authorities in the
financial sector and in the operation of financial institutions. In particular, governmental and regulatory
authorities in a number of jurisdictions have imposed stricter regulatory controls around certain financial
activities and/or have indicated that they intend to impose such controls in the future. The United States of
America, the European Union and other jurisdictions are actively considering various reform measures. In
certain jurisdictions (e.g. the United States of America), legislation has come into force in this respect,
although the rules and regulations required to implement the particulars of any such legislation have yet to be
considered. In other jurisdictions (e.g. the European Union), a number of draft pieces of legislation have
been proposed and are currently being considered. Such regulatory changes and the method of their
implementation may have a significant impact on the operation of the financial markets. It is uncertain how a
changed regulatory environment will affect the Issuer and the treatment of the Notes, the Swap Counterparty,
the Dealer and the other transaction parties. In addition, governments have shown an increased willingness
wholly or partially to nationalise financial institutions, corporates and other entities in order to support the
economy. Such nationalisation may impact adversely on the value of the stock or other obligations of any
such entity. In addition, in order to effect such nationalisation, existing obligations or stock might have their
terms mandatorily amended or be forcibly redeemed. To the extent that Credit Suisse International, as the
Swap Counterparty, Disposal Agent, Calculation Agent and Valuation Agent and/or the Reference Entities
or any other person or entity connected with the Notes is subject to nationalisation or other government
intervention, it may have an adverse effect on a holder of the Notes.
Systemic Risk
Financial institutions and other significant participants in the financial markets that deal with each other are
interrelated as a result of trading, investment, clearing, counterparty and other relationships. This risk is
sometimes referred to as “systemic risk”. Financial institutions such as Credit Suisse International, and those
other parties acting as the Trustee, the Custodian and certain Agents (or any affiliate of any of them) and any
Reference Entities referenced in the Credit Default Swap Transactions and any Eligible Securities held by
the Issuer from time to time that are financial institutions (which will be the case in respect of the Reference
Entities) or are significant participants in the financial markets are likely routinely to execute a high volume
of transactions with various types of counterparties, including brokers and dealers, commercial banks,
investment banks, insurers, mutual and hedge funds and institutional clients. To the extent they do so, they
are and will continue to be exposed to the risk of loss if counterparties fail or are otherwise unable to meet
51
their obligations. In addition, a default by a financial institution or other significant participant in the
financial markets, or concerns about the ability of a financial institution or other significant participant in the
financial markets to meet its obligations, could lead to further significant systemic liquidity problems and
other problems that could exacerbate the global financial crisis and as such have a material adverse impact
on other entities.
Foreign Exchange Risk
In addition to the foreign exchange risks associated with the Equity Swap Transitions relating to the Class A
Notes and the Class B Notes as outlined above, the Eligible Cash and/or Eligible Securities may be
denominated in a different currency from the Notes. Accordingly, the Noteholders shall be exposed to
foreign exchange risk of EUR and/or any other currency in respect of which Eligible Cash and/or Eligible
Securities are denominated in against SEK. The volatility of foreign exchange rates may therefore lead to
Noteholders suffering a significant loss on their investment as a result of the movement of such foreign
exchange dates during the life of the Notes.
No disclosure of information; disclosure of confidential information
The Issuer or Credit Suisse International may, whether by virtue of the types of relationships described
herein or otherwise, at any time, be in possession of information in relation to the Reference Entities,
Eligible Securities or the Class Equity Baskets or the Swap Counterparty that is or may be material in the
context of the issue of the Notes and that may or may not be publicly available or known to the Noteholder,
and the Notes do not create any obligation on the part of the Issuer or Credit Suisse International or any other
person to disclose to any Noteholder any such relationship or information (whether or not confidential).
52
TRANSACTION DESCRIPTION
This Transaction Description must be read as a description only of certain features of the Notes. Any
decision to invest in any Notes should be based on a consideration of this Prospectus as a whole, including
the documents incorporated by reference herein. This Transaction Description does not contain all the
information which may be important to prospective investors. Prospective investors should read the entirety
of this Prospectus and the documents incorporated by reference herein. In addition, prospective investors
should consult with their investment, legal, accounting, tax and other advisors with respect to any investment
in the Notes.
The information contained in this section is subject in its entirety to the Issue Terms of the Notes.
This section is not intended as a description of the risks an investment in any of the Notes may involve. Risks
specifically relating to the Notes are set out in the section of this Prospectus entitled “Risk Factors”.
Issuer
The Notes are issued by Argentum Capital S.A. (the “Company”) acting in respect of Compartment GAP+
2047 - 2048 November 2014 (the “Issuer”) and are secured, limited recourse obligations of the Issuer. The
Issuer is described in more detail in the section of this Prospectus entitled “Description of the Company and
the Compartment”.
Status of the Notes
The Notes are secured, limited recourse obligations of the Issuer. This means that the Secured Creditors
(which include the Noteholders and each of the Trustee and various agents involved in the issue of the Notes)
only have the right to claim against specific assets of the Issuer that relate to the Notes (being referred to in
this Prospectus as the Mortgaged Property).
Classes
The Notes are comprised of two Classes: the Class A Notes and the Class B Notes.
The Class A Notes rank pari passu without any preference among themselves and the Class B Notes rank
pari passu without any preference among themselves. Furthermore, the Class A Notes and the Class B Notes
rank pari passu with each other without any preference among the Classes.
Each Class of Notes is exposed to the same risk of credit-linkage as the other Class of Notes, but differs in its
equity index-linked or equity-linked exposure. At maturity of the Notes, a Noteholder may be entitled to
payments which are derived from the Equity Swap Transaction relating to the relevant Class and referencing
a basket of indices or shares, as described in more detail below and elsewhere in this Prospectus. Any such
additional equity index-linked or equity-linked payment receivable by a Noteholder (if any) may be different
depending on the Class of Notes it invests in.
Aggregate Nominal Amount of the Notes
The Aggregate Nominal Amount of the Series on the Issue Date will be up to SEK 400,000,000, comprising
the aggregate of the nominal amounts for each Class of Notes as follows:
(a)
up to SEK 200,000,000 in aggregate nominal amount of the Class A Notes; and
(b)
up to SEK 200,000,000 in aggregate nominal amount of the Class B Notes,
and will, in each case, be issued by the Issuer on the Issue Date.
53
The precise Aggregate Nominal Amount of each Class of Notes to be issued will be published on the website
of the Irish Stock Exchange (www.ise.ie) and filed with the Central Bank of Ireland in accordance with
Article 8 of the Prospectus Directive, in each case, on or around the Issue Date.
Interest on the Notes
No amount of interest will be payable in respect of any Class of Notes.
Maturity
No amounts are scheduled to be paid under any Class of Notes to investors in the Notes until the scheduled
maturity date of the Notes, which is expected to be on 30 December 2020, subject to any postponement in
the settlement of the Equity Swap Transaction relating to the relevant Class in accordance with its terms (the
“Scheduled Maturity Date”), as described in more detail in the section of this Prospectus entitled “Issue
Terms”. The maturity date of any Class of Notes may be further postponed as a result of a payment resulting
from the occurrence of a Triggered Credit Event in respect of the Reference Entity referenced in the Credit
Default Swap Transactions being due and payable after the Scheduled Maturity Date and/or the
determination of any Unsettled Credit Event relating to the Reference Entity as at the Credit Event
Observation Period End Date of the Notes, as described in more detail below.
Overview of the Swap Agreement
The payments which a Noteholder of a Class of Notes is entitled to receive will depend on (amongst other
things) (a) the occurrence of any Credit Event in respect of any Reference Entity under the Credit Default
Swap Transaction and (b) the performance of the Class Equity Basket referenced by the Equity Swap
Transaction, in each case relating to the relevant Class, and as illustrated by the diagram at the end of this
Transaction Description.
On the Issue Date, the Issuer will enter into the Swap Agreement in respect of the Notes with Credit Suisse
International in its capacity as Swap Counterparty, under which the Issuer and the Swap Counterparty will
enter into an Equity Swap Transaction and a Credit Default Swap Transaction relating to each Class of Notes.
On the Issue Date:
(a)
a portion of an amount equal to the Issue Price of each Class of Notes (which is expected to be
between 5% and 25% in respect of each Class) will be used to fund an initial exchange payment
under the Equity Swap Transaction referencing the relevant Class Equity Basket (the performance of
which will affect the return on such Class of Notes); and
(b)
the remaining portion of the Issue Price of each Class of Notes will be used to fund an initial
exchange payment under the Credit Default Swap Transaction relating to such Class.
The return on each Class of Notes will reflect amounts receivable by the Issuer under the Equity Swap
Transaction and the Credit Default Swap Transaction relating to such Class. Each Equity Swap Transaction
references either the Equity Index Basket (in the case of the Class A Notes) or the Equity Basket (in the case
of the Class B Notes) and, therefore, the relative return on each Class of Notes may differ and will depend on
the relative performance of the relevant Class Equity Baskets.
The Credit Default Swap Transactions will each reference, as at the Issue Date, four Reference Entities (such
number of Reference Entities as at the Issue Date (as such number may increase as a result of the
determination of one or more successor Reference Entities) is referred to in this Prospectus as the “Number
of Reference Entities”). It is important to note that (a) the Reference Entities referenced in one Credit
Default Swap Transaction will be identical to the Reference Entities referenced in the other Credit Default
Swap Transaction, and (b) the Reference Entities (and the Number of Reference Entities) may change from
time to time following the determination of one or more successor Reference Entities.
54
The Reference Entities are all banks incorporated within Europe, the United States of America or the
People’s Republic of China as described in more detail below and in the section of this Prospectus entitled
“Description of the Reference Entities”.
The notional amount of each Credit Default Swap Transaction (the “Class Notional Amount” in respect of
such Credit Default Swap Transaction) will be denominated in SEK and the size of such Class Notional
Amount will depend on the relevant Class of Notes to which such Credit Default Swap Transaction relates
and is described in more detail in the section of this Prospectus entitled “Issue Terms”.
For so long as the Notes remain outstanding, copies of the programme documentation (including the Base
Prospectus, sections of which are incorporated by reference herein) and the issue documentation (including
the documentation relating to the Credit Default Swap Transaction and the Equity Swap Transaction in
respect of each Class) will be available for inspection in printed form free of charge, during the hours
between 9.00 a.m. and 5.00 p.m. (with respect to the location of the relevant offices) on any weekday
(Saturdays and public holidays excepted), for inspection at the registered office of the Issuer and at the
Specified Offices of the Issuing and Paying Agent and the Noteholder Facilitator.
Impact of the Credit Default Swap Transactions on the Notes
Overview
Each Class of Notes is credit-linked as a result of identical (save for the specified Class Notional Amount
and the specified Class Redemption Factor) Credit Default Swap Transactions, as evidenced by a single
confirmation, which incorporate by reference the 2014 ISDA Credit Derivatives Definitions as published by
ISDA (the “Credit Derivatives Definitions”).
Under each Credit Default Swap Transaction, the Issuer is selling protection on the four Reference Entities
referenced in such Credit Default Swap Transaction. The Reference Entities referenced in one Credit Default
Swap Transaction will be identical to the Reference Entities referenced in each other Credit Default Swap
Transaction. If no Credit Events have occurred by, and no Unsettled Credit Events (as defined in the
confirmation of the Credit Default Swap Transactions) are outstanding on the Reference Business Day
immediately preceding 30 December 2020 (the “Credit Event Observation Period End Date”), under the
relevant Credit Default Swap Transaction, the Swap Counterparty will be obliged to pay an amount to the
Issuer on the Reference Business Day immediately preceding the Scheduled Maturity Date (the “Final
Exchange Date”) in respect of the relevant Credit Default Swap Transaction equal to the product of the then
outstanding Class Notional Amount as at the Final Exchange Date (as the same may have been reduced as a
result of purchases and cancellations of the Notes of such Class by the Issuer) and the Fee Calculation Factor
applicable as at the Scheduled Maturity Date.
The consequences of the occurrence of Credit Events or the existence of any Unsettled Credit Events as at
the Credit Event Observation Period End Date are described in more detail below.
Reference Entities and Reference Obligations
The Reference Entities referenced in the Credit Default Swap Transaction relating to each Class of Notes
will be identical and on the Issue Date will be banking entities. They will comprise the following as at the
Issue Date:
(a)
The Goldman Sachs Group, Inc.;
(b)
The Royal Bank of Scotland plc;
(c)
The Bank of China Limited; and
(d)
Société Générale.
55
The Goldman Sachs Group, Inc. is referred to in this Prospectus as a “US Reference Entity”.
The Reference Obligations that will be referenced in the Credit Default Swap Transactions relating to the
Notes will be identical (and each constitutes an Obligation for the purposes of the Credit Default Swap
Transactions, as described below) and on the Issue Date will be the obligations each specified as the
“Standard Reference Obligation” for the relevant Reference Entity for the “Senior Level” on a list to be
published by ISDA and, until such Standard Reference Obligations in respect of each of the following
Reference Entities are published by ISDA, as follows, subject to the terms of the Credit Default Swap
Transactions:
(a)
in respect of The Goldman Sachs Group, Inc.: USD 3,200,000,000 5.95 per cent. fixed rate notes due
2018 issued by The Goldman Sachs Group, Inc. (ISIN: US38141GFG47); and
(b)
in respect of The Bank of China Limited: USD 500,000,000 3.125 per cent. fixed rate notes due
2019 issued by The Bank of China Limited (ISIN: XS1016655349).
The Class Notional Amount of each Credit Default Swap Transaction that is allocated to each of the four
Reference Entities will be divided equally between such Reference Entities irrespective of the likelihood of
the occurrence of a Credit Event in respect of such Reference Entities. Such allocation may vary after the
Issue Date as a result of the determination of one or more successor Reference Entities and thereafter may no
longer be divided equally between any successor Reference Entities.
Descriptions of the Reference Entities are set out under the section of this Prospectus entitled “Description of
the Reference Entities”. Descriptions of the Reference Obligations are set out under the section of this
Prospectus entitled “Description of the Reference Obligations”.
Credit Events
Each of the Reference Entities referenced in the Credit Default Swap Transactions (or certain Obligations of
such Reference Entities) may be subject to the occurrence of any of the following Credit Events occurring on
and after 26 September 2014 (being the Credit Event Backstop Date) and on or prior to the Credit Event
Observation Period End Date):
(a)
Failure to Pay;
(b)
Bankruptcy;
(c)
Restructuring (save in respect of any Reference Entity that is a US Reference Entity); and
(d)
Governmental Intervention (save in respect of any Reference Entity that is a US Reference Entity).
More detailed information on the various Credit Events can be found in “Credit Events and related terms” in
the section of this Prospectus entitled “Description of the Credit Default Swaps and the Credit Event
provisions relating to the Credit Default Swap Transactions and the Notes”.
Role of the Credit Derivatives Determinations Committees
By incorporation of the Credit Derivatives Definitions, certain determinations relating to, and affecting, the
Credit Default Swap Transactions may be made by a relevant CDDC, which has the power to make binding
decisions on critical issues such as whether a Credit Event has occurred, which obligations are to be valued
and whether an Auction should take place in accordance with and as more fully described in the Credit
Derivatives Determinations Committees Rules.
56
Reference Entities may change as a result of the determination of a successor Reference Entity
The Reference Entities referenced in the Credit Default Swap Transactions (and to which the Notes are
therefore exposed) may change from time to time as a result of the determination of one or more successor
Reference Entities and, if more than one successor Reference Entity is determined, the proportion of the
Class Notional Amount of each Credit Default Swap Transaction allocated to such Reference Entity that was
subject to such succession will be divided amongst each of the new successor Reference Entities. Credit
Suisse International, as Calculation Agent under the Swap Agreement, is responsible for making
determinations as to any successor Reference Entity, provided that the Calculation Agent is not required to,
and will not, make any such determination if ISDA has announced that a CDDC has been convened for such
purpose and if such CDDC has resolved to make such determination.
Consequence of Credit Events and Unsettled Credit Events, including partial redemption of the Notes
On the Issue Date, the Issuer will enter into the Credit Default Swap Transactions relating to each Class of
Notes. The Class Notional Amount in respect of each Credit Default Swap Transaction will be equal to
100% of the Outstanding Principal Amount of the corresponding Class of Notes on the Issue Date. The Class
Notional Amount may be reduced from time to time as described below.
If a Credit Event has occurred in respect of a Reference Entity and the Swap Counterparty has elected to
trigger a settlement under the Credit Default Swap Transaction relating to each Class of Notes and an
Auction Final Price, or where the Fallback Settlement Method is applicable, the Final Price, has been
determined in accordance with such Credit Default Swap Transaction on or prior to the Credit Event
Observation Period End Date, such Credit Event will be a “Triggered Credit Event”. In such circumstances,
with respect to the Triggered Credit Event an amount will be payable by the Swap Counterparty to the Issuer
(such amount, a ”Credit Suisse Cash Settlement Amount”) on the date falling 5 Reference Business Days
after the latest date on which the Auction Final Price, or where the Fallback Settlement Method is applicable,
the Final Price is determined in respect of the Reference Entity (the “Credit Suisse Cash Settlement Date”).
The Credit Suisse Cash Settlement Amount in respect of each Credit Default Swap Transaction will be equal
to the product of:
(a)
the Reference Entity Notional Amount (or, in respect of a Relevant Restructuring, the Reference
Entity Notional Amount multiplied by a percentage as elected by the Swap Counterparty) in respect
of the Reference Entity multiplied by the Fee Calculation Factor in effect as at the date of
determination of the Auction Final Price or the Final Price, as applicable;
(b)
the relevant Auction Final Price or, where the Fallback Settlement Method is applicable, the relevant
Final Price determined in respect of the Reference Entity and the Triggered Credit Event; and
(c)
the Class Redemption Factor (being equal to the percentage of the Issue Price of the Class of Notes
received by the Swap Counterparty on the Issue Date under the Credit Default Swap Transaction
(expected to be between 75% and 95%)).
On the date falling 2 Reference Business Days after the Credit Suisse Cash Settlement Date (the “Credit
Event Instalment Date”), in respect of each Note of the relevant Class the Issuer will pay an amount equal
to its pro rata share of an amount equal to the Credit Suisse Cash Settlement Amount (the “Credit Event
Instalment Amount”) to the Noteholder. Accordingly, each Note of such Class will be redeemed in part and
the Outstanding Principal Amount of such Class will be reduced by an amount equal to the Reference Entity
Notional Amount (or, in respect of a Relevant Restructuring, the Reference Entity Notional Amount
multiplied by a percentage as elected by the Swap Counterparty) in respect of the Reference Entity. The
Credit Event Instalment Amount may be due and payable before, on or after the Scheduled Maturity Date.
Upon the payment of the Credit Suisse Cash Settlement Amount by the Swap Counterparty, the Class
Notional Amount of the Credit Default Swap Transaction will be reduced by an amount equal to the
Reference Entity Notional Amount (or, in respect of a Relevant Restructuring, the Reference Entity Notional
Amount multiplied by a percentage as elected by the Swap Counterparty) in respect of the Reference Entity
57
as at the relevant Credit Suisse Cash Settlement Date. A reduction of the Class Notional Amount of such
Credit Default Swap Transaction to zero in such circumstances prior to the Scheduled Maturity Date will not
cause such Credit Default Swap to terminate early or the Notes to redeem early, absent the occurrence of an
Early Redemption Event (which includes, among other things, any Event of Default in respect of the Notes).
If the Credit Suisse Cash Settlement Date would fall on or after the Final Exchange Date, the Class Notional
Amount will be deemed to have been so reduced as at the Final Exchange Date solely for the purpose of
calculating any Final Exchange Amount (as described below).
Accordingly, the amount payable to holders of each Class of Notes in such circumstances will, to a
significant extent, be dependent on the Auction Final Price or the Final Price, as applicable, determined in
respect of the relevant obligations of the Reference Entity to which such Triggered Credit Event relates and
will also be reduced by the application of the relevant Class Redemption Factor and the Fee Calculation
Factor (as described in more detail below). As a result, the amount payable to holders of each Class of Notes
in such circumstances will be significantly less than the amount by which the Outstanding Principal Amount
of such Class of Notes will be redeemed and may even be zero.
The determination of Triggered Credit Events, Credit Suisse Cash Settlement Dates, Auction Final Prices
and Final Prices will be identical across the Credit Default Swap Transactions for all Classes of Notes. The
reductions in the Class Notional Amount of each Credit Default Swap Transaction will however vary across
the Credit Default Swap Transactions for each Class because the Class Notional Amount applicable in
respect of each Credit Default Swap Transaction is linked to the Outstanding Principal Amount of the Notes
of the Class to which such Credit Default Swap Transaction relates.
Application of the Class Redemption Factor and the Fee Calculation Factor
The Class Redemption Factor relating to each Class of Notes reflects the fact that an amount equal to only a
percentage of the Issue Price of such Class will be paid to the Swap Counterparty under the corresponding
Credit Default Swap Transaction on the Issue Date, since the balance of the amount equal to the Issue Price
of such Class not paid to the Swap Counterparty under the Credit Default Swap Transaction is allocated to
fund the initial exchange payment under the corresponding Equity Swap Transaction. Accordingly, as the
Class Redemption Factor will be less than 100%, the amount payable in respect of the partial redemption of
each Class of Notes following the occurrence of a Triggered Credit Event will be lower than the amount
which would otherwise be payable if an amount equal to 100% of the Issue Price of each Class were paid to
the Swap Counterparty in connection with the corresponding Credit Default Swap Transaction on the Issue
Date. The application of the Class Redemption Factor in the calculation of the Credit Suisse Cash Settlement
Amount represents an automatic reduction to a Noteholder’s investment following the occurrence of a
Triggered Credit Event.
In calculating any amounts due to the Issuer under each Credit Default Swap Transaction from the Swap
Counterparty (and therefore the corresponding portion of principal payable in respect of each Class of Notes),
the Class Notional Amount and the Reference Entity Notional Amount, as applicable, of such Credit Default
Swap Transaction will be reduced by the application of the Fee Calculation Factor. As shown in the table
below, the Fee Calculation Factor is a variable percentage which will be 100% on the Issue Date and will
decrease to 94.60% on the Scheduled Maturity Date of the Notes (and will decrease further after the
Scheduled Maturity Date). Accordingly, the amounts payable in respect of the partial redemption of the
Notes following the occurrence of a Triggered Credit Event will be lower than the amount which would be
payable if such Fee Calculation Factor had not been applied.
Date
Fee Calculation Factor (%)
From, but excluding, the Issue Date to, and including, 30
December 2015
98.96
From, but excluding, 30 December 2015 to, and including, 30
December 2016
97.97
58
From, but excluding, 30 December 2016 to, and including, 30
December 2017
96.99
From, but excluding, 30 December 2017 to, and including, 30
December 2018
96.02
From, but excluding, 30 December 2018 to, and including, 30
December 2019
95.06
From, but excluding, 30 December 2019 to, and including, the
Scheduled Maturity Date
94.60
From, but excluding, the Scheduled Maturity Date to, and
including, the Maturity Date
The Extended Fee Calculation
Factor
The Extended Fee Calculation Factor is the Fee Calculation Factor on the Scheduled Maturity Date (being
94.60%) multiplied by (99%^Day Count), where:
“99%^Day Count” means 99 per cent. to the power of Day Count.
“Day Count” means a fraction the numerator of which is the number of days in the period from and
including the Scheduled Maturity Date to but excluding the Additional Exchange Date or the Credit
Suisse Cash Settlement Date, as applicable, and the denominator of which is 360 (the number of
days to be calculated on the basis of a year of 360 days with twelve thirty day months).
Number of Triggered Credit Events
One or more Credit Events may occur in respect of each Reference Entity during the life of the Notes but,
other than the occurrence of a Credit Event which is a Restructuring Credit Event in respect of which either
“Restructuring Maturity Limitation and Fully Transferable Obligation Applicable” or “Modified
Restructuring Maturity Limitation and Conditionally Transferable Obligation Applicable” is specified to be
applicable in the Matrix for he Transaction Type relating to such Reference Entity (a “Relevant
Restructuring”) (as defined in the terms of each Credit Default Swap Transaction), only one Triggered
Credit Event may occur in respect of any Reference Entity.
If a Credit Event results from a Relevant Restructuring, the Swap Counterparty may elect to trigger such
Credit Event in one or more percentages (each an “Exercised Percentage”). If the Swap Counterparty elects
to apply an Exercised Percentage in respect of the Reference Entity that is less than 100 per cent., the Swap
Counterparty may subsequently specify one or more further Exercised Percentages in respect of such
Restructuring (provided that the aggregate of all such Exercised Percentages cannot exceed 100 per cent.).
If the maximum number of Triggered Credit Events (taking into account the fact that the Swap Counterparty
may trigger a Credit Event which is a Restructuring multiple times) occur, once each of the Credit Suisse
Cash Settlement Amounts relating thereto have been paid under a Credit Default Swap Transaction, the
Class Notional Amount of such Credit Default Swap Transaction will be reduced to zero. A reduction of the
Class Notional Amount of such Credit Default Swap Transaction to zero in such circumstances prior to the
Scheduled Maturity Date will not cause such Credit Default Swap to terminate early or the Notes to redeem
early, absent the occurrence of an Early Redemption Event (which includes, among other things, any Event
of Default in respect of the Notes).
Payment of Final Redemption Amount
Under each Credit Default Swap Transaction, on the Reference Business Day immediately preceding the
Scheduled Maturity Date of the Class of Notes to which such Credit Default Swap Transaction relates (the
“Final Exchange Date”), the Swap Counterparty will pay to the Issuer an amount equal to the then
outstanding Class Notional Amount of such Credit Default Swap Transaction multiplied by the Fee
59
Calculation Factor of 94.60% (as at the Scheduled Maturity Date) (the “Final Exchange Amount”). On the
Scheduled Maturity Date, in respect of each Note of the Class the Issuer will pay an amount equal to (i) its
pro rata share of an amount equal to the Final Exchange Amount (if any) plus (ii) the Additional Payout
Amount (if any) (together, the “Final Redemption Amount”) to the Noteholder.
If the Class Notional Amount of such Credit Default Swap Transaction has been reduced to zero prior to the
Scheduled Maturity Date due to the occurrence of any Triggered Credit Event, the Final Exchange Amount
may be zero.
Extension of the Credit Default Swap Transaction and Payment of Partial Redemption Amount
In certain circumstances, the termination date of each Credit Default Swap Transaction may extend beyond
its scheduled termination date. Such occurrence may arise, in summary, where any Credit Suisse Cash
Settlement Date will fall after the Final Maturity Date or where:
(a)
one or more Credit Events have occurred in respect of one or more Reference Entities on or prior to
the Credit Event Observation Period End Date but in respect of which the Auction Final Price, or
where the Fallback Settlement Method is applicable, the Final Price, has not been determined by
such Credit Event Observation Period End Date; or
(b)
a Potential Credit Event has been determined by the calculation agent under such Credit Default
Swap Transaction (being, in effect, an event which, in the sole and absolute determination of the
Calculation Agent, may be a Credit Event) but which has not been confirmed as being a Credit Event
or not on or prior to the Credit Event Observation Period End Date,
(each such occurrences, as used herein, an “Unsettled Credit Event”).
In such circumstances, the Final Exchange Amount (if any) payable by the Swap Counterparty to the Issuer
under such Credit Default Swap Transaction on the Final Exchange Date will be an amount equal to the
product of (i) the then outstanding Class Notional Amount minus the Reference Entity Notional Amount in
respect of the Reference Entity and (ii) the Fee Calculation Factor of 94.60% (as at the Scheduled Maturity
Date) (or lower following the Scheduled Maturity Date). On the Scheduled Maturity Date, in respect of each
Note of the Class the Issuer will pay an amount equal to (i) its pro rata share of the Final Exchange Amount
(if any) so calculated plus (ii) the Additional Payout Amount (if any) (together, the “Partial Final
Redemption Amount”) to the Noteholder in partial redemption of such Note.
In relation to the Reference Entity in respect of which the Unsettled Credit Event has occurred, if it is
determined that no Credit Event has occurred under the Credit Default Swap Transaction, on the date
immediately following the date of such determination (an “Additional Exchange Date”) the Swap
Counterparty will pay to the Issuer an amount equal to the product of (i) the Reference Entity Notional
Amount in respect of such Reference Entity and (i) the Fee Calculation Factor applicable as at the Additional
Exchange Date. On the date falling two Reference Business Days after the Additional Exchange Date (an
“Unsettled Credit Event Instalment Date”), in respect of each Note of the Class the Issuer will pay an
amount equal to its pro rata share of an amount equal to the Additional Exchange Amount (the “Unsettled
Credit Event Instalment Amount”). The last occurring Additional Exchange Date will be the “Extended
CDS Termination Date” of the Credit Default Swap Transaction.
However, if it is determined that a Credit Event has occurred in respect of such Reference Entity or, where
applicable, an Auction Final Price or Final Price is determined following the Credit Event Observation
Period End Date, the Swap Counterparty will pay the Credit Suisse Cash Settlement Amount to the Issuer on
the related Credit Suisse Cash Settlement Amount, and in respect of each Note of such Class the Issue will
pay the Credit Event Instalment Amount on the related Credit Event Instalment Date, in the manner
described above under “Consequence of Credit Events and Unsettled Credit Events, including partial
redemption of the Notes”.
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Worked examples of the impact of Triggered Credit Events
The following sets out three examples of the impact of one or more Triggered Credit Events on the Credit
Default Swap Transaction relating to each Class of Notes. The figures and events used for the purposes of
the examples are indicative only and are not intended as a guide as to the actual or expected performance of
any Class of Notes. The performance of any Class of Notes may be better or worse than set out in the
following examples.
The examples all assume the following:
(a)
the Credit Default Swap Transaction references four Reference Entities each having a Reference
Entity Notional Amount of SEK 250,000;
(b)
the Outstanding Principal Amount of each Class of Notes (and the Class Notional Amount in respect
of the related Credit Default Swap Transaction) as at the Issue Date is SEK 1,000,000;
(c)
the Class Redemption Factor for each Class of Notes is 80%;
(d)
no Swap Counterparty Equity Final Exchange Amount is payable under any Equity Swap
Transaction in respect of any Class of Notes; and
(e)
no Early Redemption Event (including any Event of Default) occurs in respect of the Notes and all
transaction parties comply with their obligations relating to the Notes.
Based on this:
Example 1:
If one Triggered Credit Event occurs in respect of a Reference Entity prior to 1 January 2015 (and therefore
prior to the Credit Event Observation Period End Date) and an Auction Final Price, expressed as a
percentage, of 50% is determined in respect of such Reference Entity in the manner provided for under each
Credit Default Swap Transaction (which will be identical across all Credit Default Swap Transactions), then:
(a)
on the Credit Suisse Cash Settlement Date, the Swap Counterparty will pay a Credit Suisse Cash
Settlement Amount of SEK 98,960 (being equal to the product of (i) the Reference Entity Notional
Amount of 250,000 multiplied by a Fee Calculation Factor of 98.96%, (ii) the Auction Final Price of
50% and (iii) the Class Redemption Factor of 80%) to the Issuer, and the Class Notional Amount of
such Credit Default Swap Transaction will be reduced to SEK 750,000 (reflecting the Reference
Entity Notional Amount of SEK 250,000);
(b)
on the Credit Event Instalment Date, the Issuer will pay a holder of a Note of such Class having a
nominal amount of SEK 10,000 an amount equal to SEK 989.60, being its pro rata share of an
amount equal to the Credit Event Instalment Amount, and the Outstanding Principal Amount of
such Class will be reduced to SEK 750,000;
(c)
assuming no further Triggered Credit Events occur and there are no Unsettled Credit Events
determined as at the Credit Event Observation Period End Date, on the Final Exchange Date the
Swap Counterparty will pay the Issuer a Final Exchange Amount of SEK 709,500 (being the product
of (i) the then outstanding Class Notional Amount of SEK 750,000 and (ii) the Fee Calculation
Factor of 94.60%) to the Issuer; and
(d)
on the Scheduled Maturity Date, the Issuer will pay a holder of a Note of such Class having a
nominal amount of SEK 10,000 an amount of SEK 7,095, being its pro rata share of an amount
equal to Final Exchange Amount.
Accordingly, based on this example, in respect of each Class of Notes, a holder of a Note of such Class
having a nominal amount of SEK 10,000 as at the Scheduled Maturity Date will be entitled to a total of
61
approximately SEK 8,084.60 (being the aggregate of the amounts payable as described in paragraphs (b) and
(d) above) in respect of such Note, representing a loss of approximately SEK 1,915.40.
Example 2
If three Triggered Credit Events all occur in respect of the Reference Entities in May 2017 (and therefore
prior to the Credit Event Observation Period End Date) and an Auction Final Price, expressed as a
percentage, of 20% is determined in respect of each such Reference Entity in the manner provided for under
each Credit Default Swap Transaction (which will be identical across all Credit Default Swap Transactions),
then:
(a)
on each Credit Suisse Cash Settlement Date, the Swap Counterparty will pay a Credit Suisse Cash
Settlement Amount of SEK 38,796 (being equal to the product of (i) the Reference Entity Notional
Amount of 250,000 multiplied by a Fee Calculation Factor of 96.99%, (ii) the Auction Final Price of
20% and (iii) the Class Redemption Factor of 80%) to the Issuer, and the Class Notional Amount of
such Credit Default Swap Transaction will be reduced by SEK 250,000 (reflecting the Reference
Entity Notional Amount of SEK 250,000);
(b)
on each Credit Event Instalment Date, the Issuer will pay a holder of a Note of such Class having a
nominal amount of SEK 10,000 an amount equal to SEK 387.96, being its pro rata share of an
amount equal to the Credit Event Instalment Amount, and the Outstanding Principal Amount of such
Class will be reduced by SEK 250,000;
(c)
assuming no further Triggered Credit Events occur and there are no Unsettled Credit Events
determined as at the Credit Event Observation Period End Date, on the Final Exchange Date the
Swap Counterparty will pay the Issuer a Final Exchange Amount of SEK 236,500 (being the product
of (i) the then outstanding Class Notional Amount of SEK 250,000 and (ii) the Fee Calculation
Factor of 94.60%) to the Issuer; and
(d)
on the Scheduled Maturity Date, the Issuer will pay a holder of a Note of such Class having a
nominal amount of SEK 10,000 an amount of SEK 2,365, being its pro rata share of an amount
equal to the Final Exchange Amount.
Accordingly, based on this example, in respect of each Class of Notes, a holder of a Note of such Class
having a nominal amount of SEK 10,000 as at the Scheduled Maturity Date will be entitled to a total of
approximately SEK 3,528.88 (being the aggregate of the amounts payable in respect of the three Triggered
Credit Events as described in paragraph (b) above and the amount payable in respect of each Class as
descried in paragraph (d) above) in respect of such Note, representing a loss of approximately SEK 6,471.12.
Example 3
If four Triggered Credit Events all occur in respect of the Reference Entities in May 2018 (and therefore
prior to the Credit Event Observation Period End Date) and an Auction Final Price, expressed as a
percentage, of 10% is determined in respect of each such Reference Entity in the manner provided for under
each Credit Default Swap Transaction (which will be identical across all Credit Default Swap Transactions),
then:
(a)
on each Credit Suisse Cash Settlement Date, the Swap Counterparty will pay a Credit Suisse Cash
Settlement Amount of SEK 19,204 (being equal to the product of (i) the Reference Entity Notional
Amount of 250,000 multiplied by a Fee Calculation Factor of 96.02%, (ii) the Auction Final Price of
10% and (iii) the Class Redemption Factor of 80%) to the Issuer, and the Class Notional Amount of
such Credit Default Swap Transaction will be reduced by SEK 250,000 (reflecting the Reference
Entity Notional Amount of SEK 250,000) and, as a result, the Class Notional Amount of each Credit
Default Swap Transaction will be reduced to zero;
62
(b)
on each Credit Event Instalment Date, the Issuer will pay a holder of a Note of such Class having a
nominal amount of SEK 10,000 an amount equal to SEK 192.04, being its pro rata share of an
amount equal to the Credit Event Instalment Amount, and the Outstanding Principal Amount of such
Class will be reduced by SEK 250,000 and, as a result, the remaining Outstanding Principal Amount
of the Notes of such Class following the latest such Credit Event Instalment Date will be SEK 1.
Such SEK 1 will remain outstanding until the Scheduled Maturity Date solely for the purposes of
keeping the each Class outstanding in the event that a Swap Counterparty Equity Final Exchange
Amount is payable under any Equity Swap Transaction and accordingly an Additional Payout
Amount is payable with respect of the relevant Class on the Scheduled Maturity Date However, for
the purposes of these examples, it has been assumed that no such Swap Counterparty Equity Final
Exchange Amount and Additional Payout Amount will be payable; and
(c)
no Final Exchange Amount will be receivable by the Issuer on the Final Exchange Date and,
accordingly, no amount will be payable on the Scheduled Maturity Date in respect of any Class.
Accordingly, based on this example, in respect of each Class of Notes, a holder of a Note of such Class
having a nominal amount of SEK 10,000 as at the Scheduled Maturity Date will be entitled to a total of
approximately SEK 768.16 (being the aggregate of the amounts payable in respect of the four Triggered
Credit Events as described in paragraph (b) above) in respect of such Note, representing a loss of
approximately SEK 9,231.84.
Impact of the Equity Swap Transactions on the Notes
Overview
In respect of each Class of Notes, an Additional Payout Amount, which is expected to be funded by the
Swap Counterparty Equity Final Exchange Amount (if any) receivable by the Issuer under Equity Swap
Transaction relating to such Class and referencing the corresponding Class Equity Basket, may be payable
on the Scheduled Maturity Date. The Equity Index Basket (referenced by the Equity Swap Transaction
relating to the Class A Notes) and the Equity Basket (referenced by the Equity Swap Transaction relating to
the Class B Notes) reference a basket of indices of shares and a basket of share respectively (in each case,
the “Class Equity Basket” in respect of the relevant Class). The Equity Swap Transactions relating to the
Class A Notes and the Class B Notes will be evidenced by a single confirmation incorporating by reference
the 2002 Equity Derivatives Definitions published by ISDA (the “Equity Derivatives Definitions”).
In respect of each Class of Notes, the performance of the corresponding Class Equity Basket will determine
the Additional Payout Amounts (if any) payable in respect of such Class on the Scheduled Maturity Date.
Class Equity Baskets
The composition of each of the Equity Index Basket and the Equity Basket on the Issue Date is set out below.
The shares referenced in each Class Equity Basket may be subject to adjustment in accordance with the
terms of the corresponding Equity Swap Transaction.
Equity Index Basket
The Swap Counterparty Equity Final Exchange Amount (if any) payable to the Issuer under the Class A
Equity Swap Transaction (and, accordingly, the Additional Payout Amount (if any) in respect of the Class A
Notes) will depend on the performance of the Equity Index Basket, which on the Issue Date consists of the
following basket of indices of shares, each with the following weighting:
i
Indexi
Bloomberg Code
Weighting
1
Taiwan Taiex Index
TWSE Index
1/3
2
MSCI Singapore Free Index
SIMSCI Index
1/3
63
3
Hang Seng Index
HSI Index
1/3
Equity Basket
The Swap Counterparty Equity Final Exchange Amount (if any) payable to the Issuer under the Class B
Equity Swap Transaction (and, accordingly, the Additional Payout Amount (if any) in respect of the Class B
Notes) will depend on the performance of the Equity Basket, which on the Issue Date consists of the
following basket of shares:
i
Sharei
Bloomberg Code
Exchange
1
Zurich Insurance Group AG
ZURN VX Equity
SIX Swiss Exchange
2
Swedbank AB – A Shares
SWEDA SS Equity
Stockholm Stock Exchange
3
Royal Dutch Shell PLC – A SHS
RDSA LN Equity
London Stock Exchange
4
TeliaSonera AB
TLSN SS Equity
Stockholm Stock Exchange
5
Swiss Re AG
SREN VX Equity
SIX Swiss Exchange
6
TELE2 AB – B SHS
TEL2B SS Equity
Stockholm Stock Exchange
7
BP PLC
BP/LN Equity
London Stock Exchange
8
Novartis AG - REG
NOVN VX Equity
SIX Swiss Exchange
9
Nestle SA - REG
NESN VX Equity
SIX Swiss Exchange
10
Nordea Bank AB
NDA SS Equity
Stockholm Stock Exchange
Formula for calculating the Swap Counterparty Equity Final Exchange Amount and the Additional Payout
Amount
The Additional Payout Amount (if any) payable in respect of each Class of Notes is expected to be funded
by the Swap Counterparty Equity Final Exchange Amount (if any) receivable by the Issuer on the Reference
Business Day immediately preceding the Scheduled Maturity Date (the “Swap Counterparty Equity Final
Exchange Date”). Any such Swap Counterparty Equity Final Exchange Amount will be determined by the
Calculation Agent by reference to a formula.
For the purpose of determining any Swap Counterparty Equity Final Exchange Amount receivable by the
Issuer under the Equity Swap Transaction relating to the Class A Notes, the Calculation Agent will apply the
formula to:
(a)
determine, in respect of each index referenced in the Equity Index Basket, expressed as a percentage
(i) the arithmetic average of the official closing levels of such index on the quarterly Averaging
Dates (which are expected to be the 18th calendar day of each March, June, September and
December from, and including, 18 June 2019 to, and including, 18 December 2020) in respect of the
Equity Index Basket divided by (ii) the official closing level of such index on the Initial Setting Date
(which is expected to be 27 November 2014) (each, an “Average Index Return”);
(b)
deduct, in respect of each such index, 100% from the Average Index Return, generating a percentage
(which may be a positive or a negative) indicating the performance of such index (by reference to
the closing levels thereof on the Averaging Dates and not any other dates) over the life of such
Equity Swap Transaction (each, a “Relative Index Return”);
64
(c)
determine, by reference to the Relative Index Returns of all the indices referenced in the Equity
Index Basket (such performance determined as summarised in paragraphs (a) and (b) above in
respect of each index) and their respective weightings, the weighted average performance of all the
indices referenced in the Equity Index Basket, generating, in effect, the weighted average relative
return of the relevant basket of indices (the “Index Return”); and
(d)
if such Index Return is positive, determine the Swap Counterparty Equity Final Exchange Amount
by multiplying the Index Return by the product of (i) the Swap Notional Amount (being equal to the
Outstanding Principal Amount of the Class of Notes to which such Equity Swap Transaction relates
on the Issue Date), multiplied by the applicable Fee Calculation Factor, (ii) the Participation (which,
in respect of the Equity Index Basket, is a percentage as set out in the terms of such Equity Swap
Transaction) and (iii) the FX Factor (as set out in the terms of such Equity Swap Transaction) and
then deduct the Performance Fee (if any) from the resulting amount.
For the purpose of determining any Swap Counterparty Equity Final Exchange Amount receivable by the
Issuer under the Equity Swap Transaction relating to the Class B Notes, the Calculation Agent will apply the
formula to, in summary:
(a)
determine, in respect of each share referenced in the Equity Basket, expressed as a percentage of (i)
the arithmetic average of the official closing levels of such share on the quarterly Averaging Dates
(which are expected to be the 18th calendar day of each March, June, September and December from,
and including, 18 June 2019 to, and including, 18 December 2020) divided by (ii) the official closing
level of such share on the Initial Setting Date (which is expected to be 27 November 2014) (each, an
“Average Share Return”);
(b)
deduct, in respect of each such share, 100% from the Average Share Return for that share,
generating a percentage (which may be positive or negative) indicating the performance of such
share (by reference to the closing levels thereof on the Averaging Dates and not any other dates)
over the life of such Equity Swap Transaction (each, a “Relative Share Return”);
(c)
determine, by reference to the Relative Share Returns of all the shares referenced in the Class Equity
Basket (such performance determined as summarised in paragraphs (a) and (b) above in respect of
each share by), the arithmetic average performance of all the shares referenced in such Class Equity
Basket, generating, in effect, the average relative return of the relevant basket of shares (the “Share
Return”); and
(d)
if such Share Return is positive, determine the Swap Counterparty Equity Final Exchange Amount
by multiplying the Share Return by the product of (i) the Swap Notional Amount (being equal to the
Outstanding Principal Amount of the Class of Notes to which such Equity Swap Transaction relates
on the Issue Date) multiplied by the applicable Fee Calculation Factor and (ii) the Participation
(which, in respect of the Class Equity Basket, is a percentage as set out in the terms of such Equity
Swap Transaction) and then deduct the Performance Fee (if any) from the resulting amount.
As described in more detail under “Application of the Class Redemption Factor and the Fee Calculation
Factor” above in this Transaction Description, the Fee Calculation Factor is a variable percentage which will
be 100% on the Issue Date and will decrease to 94.60% on the Scheduled Maturity Date (and decrease
further thereafter) of the Notes. Accordingly, any Additional Payout Amount payable in respect of a Class of
Notes at maturity will be lower than the amount which would be payable if such Fee Calculation had not
been applied. A Performance Fee will only be payable in respect of such Class of Notes (and deducted from
the Swap Counterparty Equity Final Exchange Amount) if the result of paragraph (d) above in respect of
each Class of Notes (prior to the deduction of such Performance Fee in the calculation) exceeds 5.4% of the
Aggregate Nominal Amount of such Class. In such cases, 10% of such amount which is in excess of 5.4% of
the Aggregate Nominal Amount will constitute the Performance Fee in respect of each such Class. The
resultant amounts from the applications of the Fee Calculation Factor and the deduction of any Performance
Fee will effectively constitute part of commissions payable to the Distributor.
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Accordingly, a holder of a Note having a nominal amount of SEK 10,000 as at the Scheduled Maturity Date
will receive its pro rata share of the amount calculated in accordance with the formula described above. More
detailed information on the formula (and each component thereof) can be found in the section of this
Prospectus entitled “Description of the Equity Swaps”.
FX Factor
The FX Factor is a component in the calculation of any Swap Counterparty Equity Final Exchange Amount
receivable by the Issuer under the Class A Equity Swap Transaction. The FX Factor is intended to reflect the
relative movements of the USD/SEK foreign exchange rate over the life of such Equity Swap Transaction.
In respect of the Class A Equity Swap Transaction, the Calculation Agent will determine the applicable FX
Factor by dividing (i) (x) the daily fixing rate of exchange of the number of SEK per EUR 1 divided by (y)
the daily fixing rate of exchange of the number of USD per EUR 1, round to four decimal places, each such
rate as published on Reuters page ECB37 at 14:15 CET (the “USD/SEK FX Rate”) in respect of the FX
Business Day immediately following the latest occurring Averaging Date for any index in the Equity Index
Basket by (ii) the USD/SEK FX Rate in respect of the FX Business Day immediately preceding the Initial
Setting Date under the relevant Equity Swap Transaction, subject to any adjustment in accordance with the
terms of such Equity Swap Transaction.
A FX Business Day is a day on which commercial banks are open for business (including dealings in foreign
exchange in accordance with the practice of a foreign exchange market) in the principal financial centre of
the relevant currency and a day on which the Trans-European Automated Real-Time Gross Settlement
Express Transfer (TARGET2) System or any successor thereto is operating.
Adjustments and disruptions
Prospective investors in the Class A Note must note that certain adjustments may be made to the closing
levels of any of the constituent indices of the Equity Index Basket and the dates on which such levels are
determined for the purposes of the Equity Swap Transaction relating to the Class A Notes as a result of the
occurrence of (i) non-Scheduled Trading Days and Disrupted Days, (ii) Market Disruption Events or (iii) a
correction of a published level in respect of an index (each of the events as defined in the Equity Derivatives
Definition incorporated by reference in the terms of the relevant Equity Swap Transaction). Furthermore, the
Equity Swap Transaction relating to the Class A Notes may also be subject to adjustment or early
termination upon the occurrence of certain Index Adjustment Events (which include an index modification,
index cancellation or index disruption) or Additional Disruption Events (which include a change in law,
hedging disruption or increased cost of hedging) (as defined in the Equity Derivative Definitions
incorporated by reference in the terms of the relevant Equity Swap Transaction).
Prospective investors in the Class B Notes must note that certain adjustments may be made to the closing
levels of any of the constituent shares of Equity Basket and the dates on which such levels are determined for
the purposes of the Equity Swap Transaction relating to the Class B Notes as a result of the occurrence of (i)
non-Scheduled Trading Days and Disrupted Days, (ii) Market Disruption Events, (iii) Potential Adjustment
Events or (iv) a correction of a published price in respect of a share (each of the events as defined in the
Equity Derivatives Definition incorporated by reference in the terms of the relevant Equity Swap
Transaction). Furthermore, the Equity Swap Transaction relating to the relevant Class may also be subject to
adjustment or early termination upon the occurrence of certain Extraordinary Events (which include a merger
event, tender offer, nationalisation, delisting or insolvency) or Additional Disruption Events (which include a
change in law, hedging disruption, increased cost of hedging or insolvency filing) (as defined in the Equity
Derivative Definitions incorporated by reference in the terms of the relevant Equity Swap Transaction).
Certain risks arising as a result of such events are outlined in the section of this Prospectus entitled “Risk
Factors”. More detailed information on the events referred to above and the resultant adjustments can be
found in the section of this Prospectus entitled “Description of the Equity Swaps”.
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Payment of Additional Payout Amounts
If a Class of Notes remain outstanding until the Scheduled Maturity Date and a Swap Counterparty Equity
Final Exchange Amount is receivable by the Issuer under the Equity Swap Transaction relating to such Class,
a holder of a Note of such Class can expect to receive an Additional Payout Amount equal to its pro rata
share of an amount equal to such Swap Counterparty Equity Final Exchange Amount.
Worked examples of the determination of an Additional Payout Amount
The figures and events used for the purposes of these examples are indicative only and are not intended as a
guide as to the actual or expected performance of any Class of Notes, which may be better or worse than the
performance set out in the following examples.
The examples all assume the following:
(a)
the Swap Notional Amount of the Equity Swap Transaction relating to the relevant Class is SEK
1,000,000;
(b)
the Fee Calculation Factor of 94.60% as at the Scheduled Maturity Date;
(c)
a Participation of 100% in respect of the Equity Index Basket and 150% in respect of the Equity
Basket;
(d)
the number of indices referenced in the Equity Index Basket is 3;
(e)
the number of shares referenced in the Equity Basket is 10; and
(f)
a FX Factor of 1.25 based on the assumption of, in respect of the Class A Equity Swap Transaction,
(x) a final USD/SEK FX Rate of 7.5 per USD 1 divided by (y) an initial USD/SEK FX Rate of SEK
6 per USD 1.
Based on this:
Example 1:
This example assumes that the indices referenced in the Equity Index Basket have performed as following:
Official closing
level of Indexi on
the Initial
Setting Date
Arithmetic mean of
the official closing
price of Indexi on each
Averaging Date
Relative
Index
Return of
Indexi
Weightingi
Weighted Index
Return of
Indexi
Index 1
3,000
3,090
3%
1/3
1%
Index 2
1,500
1,590
6%
1/3
2%
Index 3
350
308
-12%
1/3
-4%
Indexi
In this example the weighted average performance of the Equity Index Basket will be -1%, being the sum of
the percentages in the column entitled “Weighted Index Return of Indexi”, which is referred to in this
example as the Index Return. Accordingly, no Swap Counterparty Equity Final Exchange Amount will be
payable under the Equity Swap Transaction relating to this Class of Notes as the average performance of the
Equity Index Basket is below zero.
Accordingly, based on this example, in respect of this Class of Notes, a holder of a Note having a nominal
amount of SEK 10,000 as at the Scheduled Maturity Date will not receive an Additional Payout Amount.
67
Example 2:
This example assumes that the indices referenced in the Equity Index Basket have performed as following:
Official closing
level of Indexi on
the Initial
Setting Date
Arithmetic mean of
the official closing
price of Indexi on each
Averaging Date
Relative
Index
Return of
Indexi
Weightingi
Weighted Index
Return of
Indexi
Index 1
3,000
3,090
3%
1/3
1%
Index 2
1,500
1,590
6%
1/3
2%
Index 3
350
360.5
3%
1/3
1%
Indexi
In this example the weighted average performance of the Equity Index Basket will be 4%, being the sum of
the percentages in the column entitled “Weighted Index Return of Indexi”, which is referred to in this
example as the Index Return. Accordingly, the Swap Counterparty Equity Final Exchange Amount payable
under the Equity Swap Transaction relating to the Class A Notes will be SEK 47,300, being the product of
(i) the Swap Notional Amount of SEK 1,000,000 multiplied by a Fee Calculation Factor of 94.60%, (ii) the
Participation of 100%, (iii) the Index Return of 4% and (iv) the FX Factor of 1.25 (assuming no Performance
Fee will be payable).
Accordingly, based on this example, in respect of this Class of Notes, a holder of a Note having a nominal
amount of SEK 10,000 as at the Scheduled Maturity Date will receive an Additional Payout Amount of SEK
473, being its pro rata share of the Swap Counterparty Equity Final Exchange Amount calculated above.
Example 3:
This example assumes that the indices referenced in the Equity Index Basket have performed as following:
Official closing
level of Indexi on
the Initial
Setting Date
Arithmetic mean of
the official closing
price of Indexi on each
Averaging Date
Relative
Index
Return of
Indexi
Weightingi
Weighted Index
Return of
Indexi
Index 1
3,000
3,090
3%
1/3
1%
Index 2
1,500
1,590
6%
1/3
2%
Index 3
350
413
18%
1/3
6%
Indexi
In this example the weighted average performance of the Equity Index Basket will be 9%, being the sum of
the percentages in the column entitled “Weighted Index Return of Indexi”, which is referred to in this
example as the Index Return. Accordingly, the Swap Counterparty Equity Final Exchange Amount payable
under the Equity Swap Transaction relating to the Class A Notes will be SEK 101,185, being the product of
(i) the Swap Notional Amount of SEK 1,000,000 multiplied by a Fee Calculation Factor of 94.60%, (ii) the
Participation of 100%, (iii) the Index Return of 9% and (iv) the FX Factor of 1.25 minus a Performance Fee
of SEK 5,240.
The Performance Fee of SEK 5,240 in respect of this Class of Notes is equal to the product of (i) the Swap
Notional Amount of SEK 1,000,000, (ii) the Fee Rate of 10%, and (iii) the Fee Multiplier of 5.24%. The Fee
Multiplier of 5.24% is equal to (a) (X) the product of the Participation of 100%, the Index Return of 9% and
the FX Factor of 1.25; plus (Y) 100%; multiplied by (Z) the relevant Fee Calculation Factor of 94.60%;
minus (b) 100%.
68
Accordingly, based on this example, in respect of this Class of Notes, a holder of a Note having a nominal
amount of SEK 10,000 as at the Scheduled Maturity Date will receive an Additional Payout Amount of SEK
1,011.85, being its pro rata share of the Swap Counterparty Equity Final Exchange Amount calculated
above.
Example 4:
This example assumes that the shares referenced in the Equity Basket have performed as following:
Sharei
Official closing price of
Sharei on the Initial Setting
Date
Arithmetic mean of the
official closing price of
Sharei on each Averaging
Date
Relative Share Return
of Sharei
Share 1
USD 5
USD 4.5
-10%
Share 2
USD 10
USD 12
20%
Share 3
USD 10
USD 10
0%
Share 4
CHF 8
CHF 6
-25%
Share 5
CHF 15
CHF 18
20%
Share 6
DKK 10
DKK 8
-20%
Share 7
GBP 10
GBP 12.5
25%
Share 8
EUR 20
EUR 18
-10%
Share 9
EUR 10
EUR 11
10%
Share 10
JPY 100
JPY 80
-20%
In this example the average performance of the Equity Basket will be -1%, being the sum of the percentages
in the column entitled “Relative Share Return of Sharei” divided by 10 (the number of shares referenced in
the Equity Basket). Accordingly, no Swap Counterparty Equity Final Exchange Amount will be payable
under the Equity Swap Transaction relating to this Class as the average performance of the Equity Basket is
below zero.
Accordingly, based on this example, in respect of this Class of Notes, a holder of a Note having a nominal
amount of SEK 10,000 as at the Scheduled Maturity Date will not receive an Additional Payout Amount.
Example 5:
This example assumes that the shares referenced in the relevant Equity Basket have performed as following:
Sharei
Arithmetic mean of the Relative Share Return
Official closing price of
official closing price of of Sharei
Sharei on the Initial Setting
Sharei on each Averaging
Date
Date
Share 1
USD 5
USD 5.5
10%
Share 2
USD 10
USD 12
20%
69
Share 3
USD 10
USD 10
0%
Share 4
CHF 8
CHF 6
-25%
Share 5
CHF 15
CHF 18
20%
Share 6
DKK 10
DKK 10.5
5%
Share 7
GBP 10
GBP 12.5
25%
Share 8
EUR 20
EUR 18
-10%
Share 9
EUR 10
EUR 11
10%
Share 10
JPY 100
JPY 95
-5%
In this example the average performance of the Equity Basket will be 5%, being the sum of the percentages
in the column entitled “Relative Share Return of Sharei” divided by 10 (the number of shares referenced in
the Equity Basket), which is referred to in this example as the Share Return. Accordingly, the Swap
Counterparty Equity Final Exchange Amount payable under the Equity Swap Transaction relating to this
Class will be SEK 70,950, being the product of (i) the Swap Notional Amount of SEK 1,000,000 multiplied
by a Fee Calculation Factor of 94.60%, (ii) the Participation of 150% and (iii) the Share Return of 5%
(assuming no Performance Fee will be payable).
Accordingly, based on this example, in respect of this Class of Notes, a holder of a Note having a nominal
amount of SEK 10,000 as at the Scheduled Maturity Date will receive an Additional Payout Amount of
approximately SEK 709.50, being its pro rata share of the Swap Counterparty Equity Final Exchange
Amount calculated above.
Example 6:
This example assumes that the shares referenced in the Equity Basket have performed as following:
Sharei
Arithmetic mean of the Relative Share Return
Official closing price of
official closing price of of Sharei
Sharei on the Initial Setting
Sharei on each Averaging
Date
Date
Share 1
USD 5
USD 5.5
10%
Share 2
USD 10
USD 12
20%
Share 3
USD 10
USD 10
0%
Share 4
CHF 10
CHF 10
0%
Share 5
CHF 15
CHF 18
20%
Share 6
DKK 10
DKK 10.5
5%
Share 7
GBP 10
GBP 12
20%
Share 8
EUR 18
EUR 19.8
10%
Share 9
EUR 10
EUR 11
10%
70
Share 10
JPY 100
JPY 105
5%
In this example the average performance of the Class Equity Basket will be 10%, being the sum of the
percentages in the column entitled “Relative Share Return of Sharei” divided by 10 (the number of shares
referenced in the Equity Basket), which is referred to in this example as the Share Return. Accordingly, the
Swap Counterparty Equity Final Exchange Amount payable under the Equity Swap Transaction relating to
this Class will be SEK 133,110 being the product of (i) the Swap Notional Amount of SEK 1,000,000
multiplied by a Fee Calculation Factor of 94.60%, (ii) the Participation of 150% and (iii) the Share Return of
10%, minus a Performance Fee of SEK 8,790.
The Performance Fee of SEK 8,790 in respect of such Class is equal to the product of (i) the Swap Notional
Amount of SEK 1,000,000, (ii) the Fee Rate of 10%, and (iii) the Fee Multiplier of 8.79%. The Fee
Multiplier of 8.79% is equal to (a) (X) the product of the Participation of 150% and the Share Return of
10%; plus (Y) 100%; multiplied by (Z) the relevant Fee Calculation Factor of 94.60%; minus (b) 100%.
Accordingly, based on this example, in respect of this Class of Notes, a holder of a Note having a nominal
amount of SEK 10,000 as at the Scheduled Maturity Date will receive an Additional Payout Amount of
approximately SEK 1,331.10, being its pro rata share of the Swap Counterparty Equity Final Exchange
Amount calculated above.
Impact of Payments of Commissions to the Distributor on the Notes
Overview
In connection with the issuance of the Notes by the Issuer, commissions will payable to the Distributor
during the life of the Notes. In respect of a Class of Notes, the commissions will be funded by the following
deductions incorporated into the calculations of amounts receivable by the Issuer under the Credit Default
Swap Transaction and the Equity Swap Transaction relating to such Class:
(a)
the application of the Fee Calculation Factor (which will be 100% on the Issue Date and will
decrease to 94.60% on the Scheduled Maturity Date of the Notes (and decrease further thereafter)) to
reduce the Class Notional Amount and the Reference Entity Notional Amounts of the Credit Default
Swap Transaction and the Swap Notional Amount of the Equity Swap Transaction relating to such
Class in calculating any amounts receivable by the Issuer under the Swap Agreement. Such amounts
include any Final Exchange Amount, Additional Exchange Amount, Credit Suisse Cash Settlement
Amount and the Swap Counterparty Equity Final Exchange Amount receivable by the Issuer; and
(b)
the payment of any Performance Fee, which will be deducted from any Swap Counterparty Equity
Final Exchange Amount receivable by the Issuer under each Equity Swap Transaction. Such
Performance Fee depends, in part, on the performance of the relevant Class Equity Basket referenced
by the Equity Swap Transaction relating to such Class of Notes.
As the payment of any principal (including any Additional Payout Amount) with respect to a Class of Notes
will be funded by the amounts receivable by the Issuer under the Swap Agreement, the payment of
commissions to the Distributor will ultimately be borne by the Noteholders of such Class. Accordingly, even
if no Credit Event has occurred with respect to any Reference Entity, to receive at least 100% of the amount
invested in any Class of Notes at maturity, investors will rely on the Additional Payout Amount payable
under such Class to make up for such shortfall resulting from application of such Fee Calculation Factor to
the notional amount of the Credit Default Swap Transaction after the application of the relevant Fee
Calculation Factor and deduction of the Performance Fee in the calculation of any such Additional Payout
Amount.
Worked example of minimum Index Return or Share Return to protect initial investment
The following examples are intended to illustrate that, if no Credit Event occurs under the Credit Default
Swap Transactions and the Notes of each Class are redeemed at the Final Redemption Amount on the
71
Scheduled Maturity Date, the minimum level of Index Return or Share Return which a holder of a Note
having a nominal amount of SEK 10,000 as at the Issue Date will require in order to protect its initial
investment of SEK 10,000. The figures and events used for the purposes of this example are indicative only
and are not intended as a guide as to the actual or expected performance of any Class of Notes, which may be
better or worse than the performance set out in the following example.
Example 1
This example assumes the following:
(a)
no Credit Events or Unsettled Credit Events have occurred under the Credit Default Swap
Transactions as at the Credit Event Observation Period End Date;
(b)
the Outstanding Principal Amount of the Class A Notes as at the Scheduled Maturity Date is SEK
1,000,000;
(c)
the Class Redemption Factor of the Class A Notes is 80%;
(d)
a Fee Calculation Factor of 94.60% as at the Scheduled Maturity Date;
(e)
a FX Factor of 1.25; and
(f)
a Participation of 100%.
Based on this example, on the Scheduled Maturity Date, a holder of a Note having a nominal amount of SEK
10,000 will need to receive an Additional Payout Amount of SEK 540 to protect its initial investment, being
the difference between SEK 10,000 and the Final Redemption Amount of SEK 9,460 (being its pro rata
share of the Outstanding Principal Amount of SEK 1,000,000 multiplied by the Fee Calculation Factor of
94.60%).
An Additional Payout Amount of SEK 540 means an Index Return of approximately 4.567%, being the
quotient of SEK 540 and the product of (i) a nominal amount of SEK 10,000, (ii) a Participation of 100%,
(iii) a FX Factor of 1.25 and (iv) a Fee Calculation Factor of 94.60% (assuming no Performance Fee will be
payable).
Example 2:
This example assumes the following:
(a)
no Credit Events or Unsettled Credit Events have occurred under the Credit Default Swap
Transactions as at the Credit Event Observation Period End Date;
(b)
the Outstanding Principal Amount of the Class B Notes as at the Scheduled Maturity Date is SEK
1,000,000;
(c)
the Class Redemption Factor of the Class B Notes is 80%;
(d)
a Fee Calculation Factor of 94.60% as at the Scheduled Maturity Date; and
(e)
a Participation of 150%.
Based on this example, on the Scheduled Maturity Date, a holder of a Note having a nominal amount of SEK
10,000 will need to receive an Additional Payout Amount of SEK 540 to protect its initial investment, being
the difference between SEK 10,000 and the Final Redemption Amount of SEK 9,460 (being its pro rata
share of the Outstanding Principal Amount of SEK 1,000,000 multiplied by the Fee Calculation Factor of
94.60%).
72
An Additional Payout Amount of SEK 540 means a Share Return of approximately 3.805%, being the
quotient of SEK 540 and the product of (i) a nominal amount of SEK 10,000, (ii) a Participation of 150%,
and (iii) a Fee Calculation Factor of 94.60% (no Performance Fee will be payable).
Early Redemption in Full
Overview
In certain circumstances, the Notes of a Class will be redeemed in full prior to the Scheduled Maturity Date
and the amount receivable by holders of the Notes of such Class will depend on, amongst other things, the
mark-to-market value of the Equity Swap Transaction and the Credit Default Swap Transaction relating to
such Class (or the mark-to-market value of the Swap Agreement attributable to the Equity Swap Transaction
and the Credit Default Swap Transaction relating to such Class).
Early Redemption Events
The Notes of a Class may be redeemed early, and in full, together with the Notes of each other Class, if any
of the following events happen:
(a)
the Credit Default Swap Transaction and the Equity Swap Transaction relating to such Class Notes
are terminated, or the Swap Agreement as a whole is terminated;
(b)
upon the occurrence of certain insolvency events with respect to the Swap Counterparty, the
occurrence of an Event of Default or a Termination Event (each as defined in the Swap Agreement),
the occurrence of a Termination Event (as defined in the Swap Agreement) with respect to any
Credit Default Swap Transaction or Equity Swap Transaction where the Issuer has the right to
terminate such transaction or the occurrence of certain credit rating downgrading or withdrawal
events in respect of the Swap Counterparty, no replacement Swap Counterparty is appointed within
30 calendar days of such default by the Swap Counterparty. More detailed information on the events
referred to above and the resultant replacement can be found in the section of this Transaction
Description entitled “Replacement of Swap Counterparty” below;
(c)
certain tax events occur in respect of payments due by the Issuer under the Notes of all Classes, but
not instances where (x) withholding or deduction of taxes on the Notes arises solely in respect of
FATCA; (y) withholding or deduction of taxes on the Notes arises solely as a result of the
Noteholder’s connection with the jurisdiction of incorporation of the Issuer (otherwise than by
reason of the holding of any Note or receiving any payment in respect thereof); and (z) a
withholding or deduction is imposed pursuant to European Council Directive 2003/48/EC (or any
other directive implementing the conclusions of the ECOFIN Council Meeting of 26-27 November
2000);
(d)
it becomes unlawful for the Issuer to perform any of its obligations under the Notes of all Classes,
hold any Collateral (or receive payment in respect of any Collateral) or to comply with any material
provision of any agreement entered into in connection with the Notes of all Classes;
(e)
an Event of Default occurs with respect to such Class of Notes;
(f)
the Trustee enforces the security following the occurrence of an Enforcement Event in respect of any
other Class of Notes.
Payments and Deliveries following an Early Redemption Event
Upon the occurrence of one of the events listed above, the Notes of the relevant Class may be due to be
redeemed by payment to the holder of a pro rata share of the relevant Early Cash Redemption Amount. A
description of the calculation of the Early Cash Redemption Amount is set out in the section of this
Prospectus entitled “Description of the Swap Agreement”.
73
Security
The Issuer will enter into an Issue Deed on the Issue Date with, amongst others, BNY Mellon Corporate
Trustee Services Limited as trustee of the Notes (the “Trustee”) under English law pursuant to which the
Notes will be constituted and secured (such Issue Deed as it supplements the Principal Trust Deed relating to
the Programme). In accordance with such Issue Deed, the Trustee is granted English law governed security
for itself and as trustee over, among other things, the rights of the Issuer under the Swap Agreement as
continuing security for, among other things, the payment of all sums due under the Notes. The Notes will
also have the benefit of a Luxembourg law governed security interest (pledge agreement) which is granted to
the Trustee (for, among other things, the benefit of itself and the Noteholders) over the pledged accounts
allocated to Compartment GAP+ 2047 - 2048 November 2014.
Under the Issue Deed, the Trustee undertakes to hold on trust the security granted to it for, among other
things, the benefit of itself and the Noteholders and has the right to enforce the security upon the occurrence
of an Enforcement Event in respect of any Class of Notes, for example, in the event of a non-payment of
certain amounts due under any Class of Notes. If the Trustee enforces the security following the occurrence
of an Enforcement Event in respect of a Class of Notes, the other Class will be redeemed early at the same
time as that Class.
While the Trustee is permitted to give notice to the Issuer of its determination that an Event of Default has
occurred (and that accordingly any Class of Notes have become immediately due and payable) and to
determine that an Enforcement Event has occurred and enforce the security for the Notes, it is not required to
do so unless (i) the Trustee is directed by an Extraordinary Resolution passed by the Noteholders of the
relevant Class to do so (in the case of either an Event of Default or Enforcement Event) or (ii) the Trustee is
directed by the Swap Counterparty in writing (in the case of an Enforcement Event only), and, in each case,
the Trustee is indemnified and/or secured and/or prefunded by the Noteholders of the relevant Class to its
satisfaction.
As indicated above, the Noteholders of a Class, by passing an Extraordinary Resolution, will be entitled to
direct the Trustee to give an Early Redemption Notice to the Issuer and, if necessary, enforce the security
following an Enforcement Event in respect of such Class, subject to the Trustee being indemnified and/or
secured and/or prefunded to its satisfaction. Such Extraordinary Resolution if passed by way of a signed
written resolution or given by way of electronic consents through the clearing systems (where the Notes are
held on behalf of a Clearing System) must be passed by Noteholders holding, in aggregate, the relevant Class
at least 75% in nominal amount of all of the outstanding Notes of such Class. Given the wide distribution of
the Notes, Noteholders should be aware that there may be a significant delay between the Noteholders
becoming entitled to make such a direction to the Trustee and Noteholders holding a sufficient nominal
amount of the Notes of the relevant Class being able to make such request and provide the required
indemnification, security and/or prefunding to the Trustee.
The Trustee is obliged to pay to the proceeds from the realisation or enforcement of the Mortgaged Property
with the priority set out below:
(a)
amounts owing to the Swap Counterparty pursuant to the Credit Support Annex (which will be equal
to the lesser of (A) the Available Proceeds attributable to the Swap Counterparty’s Credit Support
Balance; and (B) an amount equal to (1) the Available Proceeds attributable to the Swap
Counterparty’s Credit Support Balance minus (2) the Early Termination Amount (whether negative
or positive) with respect to the Swap Agreement);
(b)
the payment or satisfaction of all taxes owing by the Issuer;
(c)
the fees, costs, charges, expenses and liabilities due and payable to the Trustee including costs
incurred in the enforcement of the security (including any taxes to be paid, legal fees and
remuneration);
74
(d)
certain amounts owing to the Custodian, the Issuing and Paying Agent and the other Agents in
respect of reimbursement for sums paid by them in advance of receipt by them of the funds to make
such payment and their fees, costs, charges, expenses and liabilities;
(e)
any fees of the Disposal Agent;
(f)
any amounts owing to the Swap Counterparty under the Swap Agreement;
(g)
fees of the Corporate Services Provider; and
(h)
amounts owing to the Noteholders on a pari passu and pro rata basis.
The Credit Support Annex
The Issuer and Credit Suisse International will enter into a Credit Support Annex as part of the Swap
Agreement.
Due to the nature of the Equity Swap Transactions and the Credit Default Swap Transactions, upon payment
of the relevant portion of the issue proceeds of the relevant Classes of Notes to the Swap Counterparty on the
Issue Date, no further amounts will be payable by the Issuer to the Swap Counterparty under the Equity
Swap Transactions and the Credit Default Swap Transactions. Furthermore, the Issuer will be exposed to the
credit risk of Credit Suisse International as Swap Counterparty for payment of any Credit Suisse Cash
Settlement Amounts and the funding of any amounts due on final redemption of the Notes (including each
Additional Payout Amount with respect to the relevant Class of Notes).
Pursuant to the Credit Support Annex, the Swap Counterparty will be required to deliver Eligible Cash
and/or Eligible Securities to the Issuer which from time to time have an aggregate value equal to any such
exposure the Issuer may have to the Swap Counterparty, as valued on a weekly basis. The purpose of this
mechanism is to reduce the exposure of the Issuer, and therefore, the Noteholders, to the Swap Counterparty
if, upon a termination of the Swap Agreement as a result of a default by the Swap Counterparty under the
Swap Agreement or the occurrence of certain insolvency or bankruptcy events relating to the Swap
Counterparty, a termination amount is payable by the Swap Counterparty to the Issuer (which would be
expected to be the case in such circumstances). Such reduction in exposure arises as the Issuer will be
entitled to realise the value of such Eligible Cash and/or Eligible Securities in these circumstances and
account for their value in satisfaction (in whole or in part) of the amount which would otherwise have been
payable by the Swap Counterparty under the Swap Agreement.
The Eligible Cash must be denominated in EUR, SEK or USD. The Eligible Securities must be debt
obligations issued by any of Italy, the United States of America, Canada, the United Kingdom, France,
Germany, the Netherlands, Belgium, Sweden, Switzerland or Japan. The Swap Counterparty will deliver any
such Eligible Cash and/or Eligible Securities to the Custodian (on behalf of the Issuer). For so long as the
Custodian (on behalf of the Issuer) is holding any such Eligible Cash and/or Eligible Securities, they will
comprise underlying assets for the Notes.
The Swap Counterparty will act for its own benefit and is not required to, and may not, take into account the
interests of the Noteholders in determining what securities, meeting the required criteria, to deliver to the
Issuer under the Credit Support Annex as Eligible Cash and/or Eligible Securities.
Replacement of Swap Counterparty and Agents and Rights of Noteholder Facilitator
Replacement of Swap Counterparty
The terms of the Notes provide that, upon the occurrence of (i) a Counterparty Bankruptcy Credit Event; or
(ii) an Event of Default (as defined in the Swap Agreement) with respect to the Swap Counterparty (other
than a Counterparty Bankruptcy Credit Event); or (iii) a Termination Event (as defined in the Swap
Agreement) where the Issuer has the right to designate an Early Termination Date in respect of the Credit
75
Default Swap Transactions (a “CDS Termination Event”); or (iv) a Termination Event (as defined in the
Swap Agreement) where the Issuer has the right to designate an Early Termination Date in respect of any
Equity Swap Transaction (an “Equity Swap Termination Event”); or (v) the long term senior, unsecured
rating assigned by Moody’s Investors Service Limited (“Moody’s”) to the Swap Counterparty being
withdrawn or less than Ba1 or if the short term rating assigned by Moody’s to the Swap Counterparty is less
than P-3 (any such downgrade or withdrawal, a “Moody’s Ba1/P-3 Downgrade” and such event, along with
each of a Counterparty Bankruptcy Credit Event, an Event of Default with respect to the Swap Counterparty
(other than a Counterparty Bankruptcy Event), a CDS Termination Event and an Equity Swap Termination
Event, a “Replacement Event”), the Issuer will not designate an Early Termination Date and will notify
Garantum Fondkommission AB (as Noteholder Facilitator) as soon as reasonably practicable upon becoming
aware of any such occurrence.
If (i) a Replacement Event (other than a Moody’s Ba1/P-3 Downgrade) occurs or (ii) (x) a Moody’s Ba1/P-3
Downgrade occurs and (y) the Swap Counterparty gives its prior written consent to such direction, Garantum
Fondkommission as the Noteholder Facilitator is entitled to direct the Issuer by notice copied to the Trustee
to enter into a replacement Swap Agreement with a replacement Swap Counterparty in respect of all Credit
Default Swap Transactions and all Equity Swap Transactions or (in the case of a CDS Termination Event
only) in respect of the Credit Default Swap Transactions and/or (in the case of an Equity Swap Termination
Event) in respect of the relevant Equity Swap Transaction(s), identified by the Noteholder Facilitator. For
the avoidance of doubt, the occurrence of a Moody’s Ba1/P-3 Downgrade will not entitle the Issuer to
terminate the Swap Agreement and the Noteholder Facilitator will not be entitled to give such a replacement
direction upon the occurrence of a Moody’s Ba1/P-3 Downgrade unless the Swap Counterparty has given its
prior written consent.
With respect to the occurrence of a Replacement Event which would otherwise have given rise to an early
redemption of the Notes, if a replacement Swap Agreement is entered into by the Issuer with such
replacement Swap Counterparty within 30 calendar days of the relevant Replacement Event, then an early
redemption under the Notes will not occur as a result. Instead, the ongoing payment obligations of the Swap
Counterparty under the Swap Agreement would, effectively, now be ongoing payment obligations of such
replacement Swap Counterparty.
Once appointed, if a replacement Swap Counterparty were itself to be subject to a Replacement Event, the
same replacement process outlined herein would apply. Again, if a replacement Swap Counterparty was not
appointed within 30 calendar days of the occurrence of a Replacement Event which gives rise to an early
redemption of the Notes, then the Notes would redeem early.
In order for a replacement Swap Agreement to be entered into in these circumstances, certain requirements
need to be met, including:
(a)
the replacement Swap Counterparty must be a reputable financial institution with a place of business
in London which enters into derivative transactions as part of its ongoing business activities and
which has, as a minimum, the Ba1/P-3 Rating as of the date the replacement Swap Agreement is
entered into;
(b)
the replacement Swap Counterparty must be satisfactory to the Issuer and the Trustee; and
(c)
the price such replacement Swap Counterparty is willing to pay or receive to enter into such
replacement Swap Agreement must be satisfactory to the Swap Counterparty subject to the
Replacement Event.
Where a replacement Swap Agreement is entered into, certain costs and expenses may be incurred by the
Trustee and the Issuer and these are expected to be funded by the replacement Swap Counterparty on the
date it enters into the replacement Swap Agreement.
The Swap Counterparty may, under these provisions, be replaced more than once during the term of the
Notes as a result of defaults by any subsequent replacement Swap Counterparty. Therefore, the Swap
76
Counterparty may not be Credit Suisse International during the term of the Notes and it is not possible to
know as at the Issue Date, the identity of any replacement Swap Counterparty that may enter into a
replacement Swap Agreement in connection with the Notes in the circumstances referred to above.
Replacement of Agents
Where the Swap Counterparty is replaced in the circumstances contemplated above and the existing Swap
Agreement has been terminated in full, it is intended that the agency roles performed by such entity, which,
as at the Issue Date, include the Calculation Agent and Disposal Agent in respect of the Notes, would be
transferred to another entity or entities identified by Garantum Fondkommission AB (or any successor entity
thereto) (as Noteholder Facilitator), provided that certain requirements were met, including:
(a)
the entity or entities must be reputable financial institutions with a place of business in London
which provides such agency services as part of their ongoing business activities and which has or
have, as a minimum, the Ba1/P-3 Rating as of the date of appointment; and
(b)
the entity or entities must be satisfactory to the Issuer, Trustee and replacement Swap Counterparty.
Following such identification of the replacement entity or entities, the Issuer is then required to use
reasonable efforts to enter into such agreements as are necessary to appoint such entity or entities to perform
such agency roles on, or as soon as reasonably practicable following, the entry into of a replacement Swap
Agreement with the replacement Swap Counterparty.
The relevant Agents may, under these provisions, be replaced more than once during the term of the Notes
where the Swap Counterparty is also replaced as described above.
77
Reduction for Fee Calculation
Factor and possible reduction by
reference to Credit Events (if any)
Credit and Equity Linkage for each Class
CREDIT
BASKET
FOR
SERIES
COMPANY
COMPARTMENT GAP+ 2047 - 2048 November 2014
CDS
CLASS A
NOTES
CSi
EQUITY SWAP
SERIES
2014 – 61
EQUITY
INDEX
BASKET
CDS
CLASS B
NOTES
EQUITY SWAP
EQUITY
BASKET
Possible Additional Payout
Amount by reference to increase
in average share price of the
relevant Class Equity Basket, but
subject to fees.
78
QUESTIONS AND ANSWERS
The following section answers some questions that prospective investors might have regarding the Notes, in
general terms only. It does not contain all the information which may be important to prospective investors.
Prospective investors should read the entirety of this Prospectus and, in particular, the Issue Terms of the
Notes, the Summary, the Risk Factors, the Transaction Description and the more detailed information in
respect of the Credit Default Swap Transactions and the Equity Swap Transactions that is contained
elsewhere in this Prospectus and in the Base Prospectus or is incorporated by reference in such documents.
In addition, prospective investors should consult with their investment, legal, accounting, tax and other
advisors with respect to any investment in the Notes.
The information contained in this section is subject in its entirety to the other sections of this Prospectus.
What
Notes?
are
the The Notes are investment instruments issued by Argentum Capital S.A. acting in
respect of Compartment GAP+ 2047 - 2048 November 2014 in the form of notes.
The Notes are comprised of two Classes: the Class A Notes and the Class B Notes.
The Notes are credit-linked to a basket of identical reference entities and equitylinked to the performance of either a basket of shares or a basket of indices of shares.
Is any interest No. Interest is not payable in respect of any Class of Notes.
payable on the
Notes?
Where is my money The Issuer will use the issue proceeds of the Notes to enter into the Equity Swap
Transactions and the Credit Default Swap Transactions with the Swap Counterparty.
invested?
The Issuer will pay an amount equal to the Issue Price of the Notes to the Swap
Counterparty under the terms of such transactions on or around the Issue Date.
The return on each Class of Notes is linked to the Equity Swap Transaction
(referencing the performance of the relevant Class Equity Basket) and the Credit
Default Swap Transaction relating to the relevant Class.
Are
the
Notes No. The Issuer will pay an amount equal to the Issue Price of the Notes to the Swap
secured on any Counterparty under the Equity Swap Transactions and the Credit Default Swap
Transactions, and therefore no Original Collateral is purchased by the Issuer.
Original
Collateral?
Under the Credit Support Annex in respect of the Swap Agreement, the Swap
Counterparty will deliver to the Custodian (on behalf of the Issuer), certain cash
and/or securities meeting criteria set out in the Credit Support Annex in respect of the
Issuer’s exposure to the Swap Counterparty. For so long as the Custodian (on behalf
of the Issuer) is holding any such cash and/or securities, they will comprise
underlying assets for the Notes and Collateral.
Is the scheduled
return on each
Class
of
Notes
expected to be the
same?
No. A portion of the return on any Class of Notes will depend on the Equity Swap
Transaction relating to such Class and referencing the performance of the
corresponding Class Equity Basket relating to such Class (as reduced by the
application of the relevant Fee Calculation Factor and deduction of the relevant
Performance Fee from the Swap Counterparty Equity Final Exchange Amount (if
any) receivable by the Issuer under such Equity Swap Transaction). The performance
of the Class Equity Basket and the return under the Equity Swap Transaction
referencing such Class Equity Basket may vary between Classes. As a result, one
Class of Notes may perform better or worse than the other Class of Notes.
79
When are the Notes
scheduled
to
mature
if
not
redeemed early?
The Notes are scheduled to mature on 30 December 2020. However, the scheduled
maturity of the Notes may be extended beyond this date as a result of any
postponement in the settlement of the Equity Swap Transaction referencing the
relevant Class Equity Basket to the latest date for payment of any Swap Counterparty
Equity Final Exchange Amount to the Issuer.
Furthermore, the maturity date of the Notes will be extended beyond the Scheduled
Maturity Date, and the amount payable on redemption of the Notes in connection
with such extension will change, in the event that there are any Unsettled Credit
Events in respect of any of the Reference Entities under the Credit Default Swap
Transaction as at the Credit Event Observation Period End Date.
Do
the
Notes
redeem at par on
the
Scheduled
Maturity Date?
No. It is expected that, on the Scheduled Maturity Date, provided that no Credit
Events have occurred and there are no Unsettled Credit Events under the Credit
Default Swap Transactions as at the Credit Event Observation Period End Date, each
Note having an Outstanding Principal Amount equal to SEK 10,000 will be
redeemed on the Scheduled Maturity Date by payment of:
(a)
SEK 9,460 (being SEK 10,000 multiplied by the Fee Calculation Factor of
94.60% (as at the Scheduled Maturity Date)); and
(b)
an Additional Payout Amount (if any), being its pro rata share of an amount
(if any) equal to the Swap Counterparty Equity Final Exchange Amount
receivable by the Issuer under the Equity Swap Transaction relating to such
Class of Notes and referencing the corresponding Class Equity Basket.
Notwithstanding the above, there can be no assurance that the Additional Payout
Amount in respect of any Class of Notes will be greater than zero. Subject to the
proviso above, if any such Additional Payout Amount is zero, the relevant Class of
Notes will be redeemed at less than its Outstanding Principal Amount.
Who is the Swap The Swap Counterparty will be Credit Suisse International on the Issue Date and it
Counterparty and will continue to act as Swap Counterparty until the Maturity Date unless (i) it
defaults under the Swap Agreement; (ii) it becomes insolvent; (iii) the Credit Default
what is its role?
Swap Transactions are otherwise capable of being terminated; (iv) any Equity Swap
Transaction is otherwise capable of being terminated or (v) a Moody’s Ba1/P-3
Downgrade occurs and, in each case, the Swap Counterparty is replaced (in respect
of the Swap Agreement in its entirety or, as the case may be, in respect of the Credit
Default Swap Transactions only and/or in respect of one or more of the relevant
Equity Swap Transaction(s)), at the direction of Garantum Fondkommission AB (or
any successor entity thereto) (as Noteholder Facilitator) in accordance with the Issue
Terms of the Notes within 30 calendar days of such occurrence. There can be no
assurance that any such replacement will occur even where such an event has
occurred. Where such replacement does not occur within 30 calendar days following
any such event (except for a Moody’s Ba1/P-3 Downgrade), the Swap Agreement
(or, as the case may be, the Credit Default Swap Transactions and/or the relevant
Equity Swap Transaction(s)) will terminate and (if the Swap Agreement or the Credit
Default Swap Transactions are terminated) the Notes of all Classes will redeem
early.
In consideration for the issue of the Notes, the Dealer will procure that the Swap
Counterparty will enter into a Swap Agreement with the Issuer and the Equity Swap
Transactions and the Credit Default Swap Transactions in respect of the Notes. The
Issuer will pay or arrange payment of an amount to the Swap Counterparty equal to
the Issue Price of the relevant Class of Notes and under the terms of the Swap
80
Agreement, the Swap Counterparty will pay to the Issuer any amount due to be paid
on the Notes.
The Credit Default Swap Transactions are credit derivative transactions. The terms of
the Credit Default Swap Transactions will be identical across all Classes save for (a)
the Class Notional Amount which, in respect of each Credit Default Swap
Transaction, will be equal to the Outstanding Principal Amount of the Class of Notes
which such Credit Default Swap Transaction relates to (as the same may be reduced
as a result of Credit Events and, potentially, Unsettled Credit Events) and (b) the
Class Redemption Factor.
The Swap Counterparty Equity Final Exchange Amount receivable by the Issuer
under each Equity Swap Transaction is linked to the performance of the
corresponding Class Equity Basket. While the terms of each Equity Swap
Transaction are identical, the Class Equity Basket to which each Equity Swap
Transaction is linked are not.
The Swap Counterparty will also enter into a Credit Support Annex with the Issuer as
part of the Swap Agreement. The purpose of this is to reduce the Issuer’s exposure to
the Swap Counterparty under the Swap Agreement as a whole (including each Equity
Swap Transaction and Credit Default Swap Transaction).
What
Reference The Reference Entities referenced in each Credit Default Swap Transaction as at the
Entities
are Issue Date will comprise the following four Reference Entities:
referenced in each
The Goldman Sachs Group, Inc.;
Credit
Default (a)
Swap Transaction?
(b)
The Royal Bank of Scotland plc;
(c)
The Bank of China Limited; and
(d)
Société Générale.
This list may change during the life of the Notes (including as a result of events
occurring prior to the Issue Date) as a result of the determination of one or more
successor Reference Entities on or after the Successor Backstop Date (or, in the case
of a “Universal Successor”, on or after 1 January 2014).
The Class Notional Amount of each Credit Default Swap Transaction that is
allocated to each of the four Reference Entities as at the Issue Date will be divided
equally between such Reference Entities irrespective of the likelihood of the
occurrence of a Credit Event in respect of such Reference Entities. The weighting of
such allocation may vary upon the determination of one or more successor Reference
Entities.
Prospective investors must note that it is possible that their investment in the Notes
may be reduced to zero as a result of the occurrence of Credit Events occurring prior
to the Issue Date. Prospective investors should only make an investment in the Notes
if they fully understand and are prepared to accept this risk, as well as the other risks
relating to the Notes.
Each of the Reference Entities (subject to the determination of one or more successor
Reference Entities) are banks who, between them, have operations across the globe
including in Europe, the United States of America, Asia and South America.
81
Is it possible to A Reference Entity may not be changed at the election of the Noteholders, the Issuer
change a Reference or the Swap Counterparty, although the determination of one or more successor
Reference Entities with respect to any such Reference Entity on or after the
Entity?
Successor Backstop Date (or, in the case of a “Universal Successor”, on or after 1
January 2014) may result in its replacement (which may include the original
Reference Entity).
A “Universal Successor” means, with respect to a Reference Entity which is not a
sovereign, the single entity which assumes all of the obligations (including at least
one relevant bond or loan) of the Reference Entity and at the time of the
determination either (i) the Reference Entity has ceased to exist, or (ii) the Reference
Entity is in the process of being dissolved (however described) and the Reference
Entity has not issued or incurred any borrowed money obligation at any time since
the legally effective date of the assumption.
What
is
a If ISDA publicly announces that a CDDC has resolved that a different entity or
“Successor” to a entities has or have become successor(s) to the original Reference Entity or the
Reference
Entity Calculation Agent under the Credit Default Swap Transactions identifies a
and
how
can “Successor” to the original Reference Entity, for example where such successor
succession
affect assumes obligations of the original Reference Entity under the latter’s bonds or loan,
or issues bonds or incurs loans in exchange for bonds or loans of the original
the Notes?
Reference Entity, including in certain circumstances as part of a pre-determined
series of steps, to which the Notes are linked, then such entity will be deemed to be a
“Successor” to the original Reference Entity.
The identity of an original Reference Entity will be treated as having been amended
accordingly for the purposes of the Notes so that, following the determination or
announcement of a “Successor”, the Notes will be linked to the credit risk of the
Successor. Where “Financial Reference Entity Terms” applies to the Credit Default
Swap Transactions and “Senior Level” has been specified as applicable, the
successor will follow the senior debt. The credit risk associated with a Successor or
Successors may be different from and could be greater than the credit risk associated
with the original Reference Entity.
The Successor Backstop Date is a rolling date which is:
(a)
if a CDDC receives a request to resolve whether or not there is one or more
Successors to the Reference Entity, 90 calendar days prior to the date of such
request (regardless of whether the CDDC resolves to determine such matter
or not); or
(b)
otherwise, 90 calendar days prior to the date on which notice of the
occurrence of a succession is delivered by the Calculation Agent.
If the CDDC makes no resolution as to whether a succession has occurred or is not
convened to consider the question, the Calculation Agent may determine the
occurrence of a succession.
Can a succession Yes. The Successor Backstop Date may be prior to the Issue Date and therefore a
occur prior to the succession may occur prior to the Issue Date.
Issue Date?
Noteholders should conduct their own review of any recent developments with
respect to a Reference Entity by consulting publicly available information. If a
82
request has been delivered to convene a CDDC prior to the Issue Date to determine
whether a succession has occurred with respect to a Reference Entity, details of such
request may be found on the ISDA website http://www.isda.org/credit.
What happens if a
Credit
Event
occurs in respect of
any
of
the
Reference Entities
under the Credit
Default
Swap
Transaction?
The Credit Events applicable to the Reference Entities (and the relevant obligations
relating thereto) are:
(a)
Failure to Pay;
(b)
Bankruptcy;
(c)
Restructuring (save in respect of a Reference Entity that is a US Reference
Entity); and
(d)
Governmental Intervention (save in respect of a Reference Entity that is a US
Reference Entity).
More detailed information on the various Credit Events can be found in “Credit
Events and related terms” in the section of this Prospectus entitled “Description of
the Credit Default Swaps and the Credit Event provisions relating to the Credit
Default Swap Transactions and the Notes”.
Each time a Credit Event occurs in respect of a Reference Entity referenced in the
Credit Default Swap Transaction and an Event Determination Date relating thereto is
determined (including, without limitation, where such Event Determination Date
occurs in respect of an Unsettled Credit Event that is determined:
(a)
in respect of each Class of Notes, an amount will be payable by the Swap
Counterparty to the Issuer on the relevant Credit Suisse Cash Settlement
Date (and on the next following Credit Event Instalment Date, being two
Reference Business Days after such Credit Suisse Cash Settlement Date,
from the Issuer to the Noteholders of such Class, on a pro rata basis, in
partial redemption of the relevant Class of Notes) equal to the Credit Suisse
Cash Settlement Amount which is an amount equal to the product of (i) the
relevant Reference Entity Notional Amount (or, in respect of a Relevant
Restructuring, the Reference Entity Notional Amount multiplied by a
percentage as elected by the Swap Counterparty) (as determined under such
Credit Default Swap Transaction) of the Reference Entity to which such
Credit Event relates multiplied by the applicable Fee Calculation Factor (a
variable factor which will be 100% on the Issue Date and will decrease over
the term of the Notes to be 94.60% on the Scheduled Maturity Date of the
Notes (and decrease further thereafter)), (ii) the Class Redemption Factor
and (iii) the applicable Auction Final Price (or, where the Fallback
Settlement Method applies, the Final Price) determined in respect of the
relevant Reference Entity. A Credit Event Instalment Date may fall before,
on or after the Scheduled Maturity Date; and
(b)
the Outstanding Principal Amount of each Class of Notes and the Class
Notional Amount of the Credit Default Swap Transaction in respect of each
Class of Notes will be reduced as at the relevant Credit Suisse Cash
Settlement Date by an amount equal to the Reference Entity Notional
Amount (or, in respect of a Relevant Restructuring, the Reference Entity
Notional Amount multiplied by a percentage as elected by the Swap
Counterparty) (as determined under such Credit Default Swap Transaction).
83
In respect of each Class of Notes, on the Reference Business Day immediately
preceding the Scheduled Maturity Date (such date, the “Final Exchange Date”), the
Swap Counterparty will pay to the Issuer an amount (if any) equal to the product of
(i) the then outstanding Class Notional Amount of the Credit Default Swap
Transaction (being equal to the then Outstanding Principal Amount of such Class)
and (ii) the applicable Fee Calculation Factor of 94.60% (as at the Scheduled
Maturity Date of the Notes).
If there is any Unsettled Credit Event in respect of any Reference Entity as at the
Credit Event Observation Period End Date (which will arise not just where a Credit
Event has occurred but no related Event Determination Date has yet occurred but
also if a Potential Credit Event has been determined in respect of the Reference
Entity), the termination date of the Credit Default Swap Transactions, and
accordingly, the final maturity date of the Notes, will be extended beyond the
Scheduled Maturity Date. In such circumstances, there may be a significant amount
of time between the Scheduled Maturity Date and the date on which the Notes are
redeemed in full. During such extension period, the Swap Counterparty will pay any
Credit Suisse Cash Settlement Amount and/or any Additional Exchange Amount
(being equal to the Reference Entity Notional Amount), as applicable, to the Issuer
under each Credit Default Swap Transaction. Noteholders do not receive any
compensation as a result of any such extension.
More detailed descriptions of the amounts receivable by the Issuer under each Credit
Default Swap Transaction and thus payable to the Noteholders of the relevant Class
(and the associated timing and potential adjustments thereof) are set out in the
section of this Prospectus entitled “Transaction Description”.
Can a Credit Event Yes. The Credit Event Backstop Date may fall before the Issue Date and therefore a
occur prior to the Credit Event may have occurred prior to the Issue Date.
Issue Date?
Noteholders should conduct their own review of any recent developments with
respect to a Reference Entity by consulting publicly available information. If a
request has been delivered to ISDA prior to the Issue Date to determine whether a
Credit Event has occurred with respect to a Reference Entity, details of such request
may be found on the ISDA website at http://www.isda.org/credit.
What
is
the
difference between
the Notes and a
bond issued by any
Reference Entity?
The Notes give the investor exposure to the credit risk of each Reference Entity
without having to own a bond or other type of debt obligation of such Reference
Entity. None of the Reference Entities themselves are a party to the Notes nor do any
of the Reference Entities have a direct involvement in the issue of the Notes or the
entry into the Swap Agreement, and an investor will not be able to claim against any
Reference Entity for any losses it suffers from a Credit Event of any of the Reference
Entities. Neither the Issuer nor the Swap Counterparty is obliged to hold any
obligation of any of the Reference Entities or otherwise have any credit risk exposure
to any of the Reference Entities. In addition to the credit risk of each of the
Reference Entities to which the Notes are linked, an investor will also be exposed to
credit risk in relation to the Agents, the Custodian and the Swap Counterparty, so
even if all of the Reference Entities are performing well, an investor may still suffer a
loss under the Notes as a result of these other credit risks.
What determines The Additional Payout Amount payable for each Class of Notes is determined by the
the amount of any Swap Counterparty Equity Final Exchange Amount receivable by the Issuer under
Additional Payout the Equity Swap Transaction related to that Class of Notes.
Amount
payable
The respective Swap Counterparty Equity Final Exchange Amount relating to the
84
under the Notes?
relevant Class of Notes takes into account the application of the Fee Calculation
Factor of 94.60% (as at the Scheduled Maturity Date of the Notes) and the deduction
of the Performance Fee (if any) payable in respect of such Class of Notes.
In respect of each Note, its pro rata share of an amount equal to the Swap
Counterparty Equity Final Exchange Amount receivable by the Issuer under the
Equity Swap Transaction relating to the relevant Class will be the Additional Payout
Amount payable in respect of such Note (which will never be less than zero).
The Swap Counterparty Equity Final Exchange Amount is also subject to applicable
foreign exchange rates and the level of Participation and other adjustments described
in this section and the section of this Prospectus entitled “Description of the Equity
Swaps”, so the Additional Payout Amount (if any) payable in respect of each Class
of Notes may vary from the actual performance of the basket of shares.
What
are
the The Equity Swap Transactions are derivative transactions entered into between the
Equity
Swap Issuer and the Swap Counterparty which track the performance (by reference to the
increase or decrease in average value) of a basket of shares over certain dates within
Transactions?
a specified period of time in respect of each Class of Notes. Each Equity Swap
Transaction allows the Issuer, and therefore the Noteholders, to benefit if the average
value of the basket of shares or weighted average of the basket of indices of shares
increases. However, as the Swap Counterparty Equity Final Exchange Amount is
subject to a floor of zero, if the average value of a basket of share or weighted
average of a basket of indices in relation to an Equity Swap Transaction decreases,
this will result in no final payment under the Equity Swap Transaction.
Which shares or Each Class of Notes will be exposed to the performance of a basket of shares or a
indices will the basket of indices of shares. The Equity Swap Transaction relating to the Class A
Notes be exposed Notes references the performance of the Equity Index Basket. The Equity Swap
Transaction relating to the Class B Notes references the performance of the Equity
to?
Basket.
The basket of shares or indices of shares for each Class of Notes is set out in the
sections of this Prospectus entitled “Transaction Description” and “Description of
the Equity Swaps”.
Can there be any
change
to
the
shares or indices in
the baskets?
Yes. With respect to the Equity Index Basket, on the occurrence of certain events in
relation to an index, including an index modification, index cancellation or index
disruption, the relevant Equity Swap Transaction may be terminated, or the
Calculation Agent may make adjustments to the terms of the relevant Equity Swap
Transaction to account for the economic effect on such Equity Swap Transaction of
the event.
With respect to the Equity Basket, on the occurrence of certain events in relation to a
share or its issuer, including merger events, tender offers, nationalisation, insolvency
or delisting, the Calculation Agent under the Swap Agreement may select a new
underlying share, which will be deemed to be one of the shares in the basket in place
of the original share, and the Calculation Agent may make adjustments to the terms
of the Equity Swap Transaction to account for the economic effect on the Equity
Swap Transaction of the event and/or the replacement of the original share. Any
replacement share will, to the extent practicable, be selected from the same economic
sector, be denominated in the same currency and have a similar market capitalisation
to the relevant replaced share.
These events and associated potential adjustments are described in more detail in the
85
sections of this Prospectus entitled “Transaction Description” and “Description of
the Equity Swaps”.
How
will
the
payments under the
Equity
Swap
Transactions
be
calculated?
The Swap Counterparty Equity Final Exchange Amount determined under each of
the Equity Swap Transactions is calculated by the Calculation Agent under the Swap
Agreement using a formula that factors in the share price or index level performance
of the relevant basket, the relative foreign exchange rate movements, and the
Participation for each Class of Notes.
A summary of the formula used is set out in the sections of this Prospectus entitled
“Transaction Description” and “Description of the Equity Swaps”.
What
is
Participation?
the The Participation reflects the level of exposure to the performance of the basket of
shares or indices of shares (ignoring reduction for the Fee Calculation Factor and any
Performance Fee). A Participation of 100% will track the performance of the relevant
basket. A Participation of more than 100% will magnify the result of any increase in
the average value of the relevant basket, creating increased benefit. Conversely, a
Participation of less than 100% will result in a reduction of any increase in the
average value of the basket creating decreased exposure.
As each Equity Swap Transaction sets a limit of zero on the Swap Counterparty
Equity Final Exchange Amount, whilst the Participation has the function of
increasing or decreasing benefit to any increase in the average value of the basket of
shares or weighted average of the basket of indices, it will not increase loss due to
any reduction in the average value of the basket of shares or the weighted average
value of the basket of share indices.
Which
foreign
exchange rate will
each Class of Notes
be exposed to?
The Class A Notes are exposed to the relative movements in the EUR/SEK and
EUR/USD foreign exchange rates over the term of the Equity Swap Transaction. The
Class B Notes are not exposed to such relative movements in a foreign exchange
rate.
It is likely that the foreign exchange rate will fluctuate during the term of the Equity
Swap Transactions so if the applicable exchange rate means that there are fewer SEK
per unit of EUR or USD on the FX Business Day following the latest occurring
Averaging Date than as at the Initial Setting Date, the Swap Counterparty Equity
Final Exchange Amount will be lower than if such amount was determined by
reference to the exchange rate as at the Initial Setting Date.
If the exchange rate results in there being more SEK per unit of EUR or USD on the
relevant FX Business Day following the latest occurring Averaging Date than as at
the Initial Setting Date, the Swap Counterparty Equity Final Exchange Amount will
be higher than if such Swap Counterparty Equity Final Exchange Amount was
determined by reference to the exchange rate as at the Initial Setting Date.
Are
there
any
circumstances
where
payments
under the Equity
Swap Transaction
may be adjusted,
delayed
or
postponed?
Yes. The terms of the Equity Swap Transactions provide for a number of
circumstances where both the amounts payable under the Equity Swap Transactions
and the timing of such payments may be adjusted or postponed and/or which may
lead to the early redemption of the Equity Swap Transactions in certain
circumstances.
These include, among others, as a result of:
(a)
the occurrence of certain market disruption events in respect of the stock
exchanges relating to any of the shares or indices of shares in the relevant
86
Class Equity Basket;
(b)
the occurrence of certain Additional Disruption Events referenced in the
applicable Equity Swap Transaction; and/or
(c)
the occurrence of merger events, tender offers, delisting events,
nationalisation or insolvency of any of the shares (or issuers thereof) or the
occurrence of any index modification, index cancellation or index disruption
with respect to any of the indices referenced in the applicable Equity Swap
Transaction.
More detail on these factors is provided in the sections of this Prospectus entitled
“Risk Factors”, “Transaction Description” and “Description of the Equity Swaps”.
What is ISDA?
The International Swaps and Derivatives Association, Inc. (“ISDA”) is a trade
organisation of participants in the market for over-the-counter (“OTC”) derivatives.
It is headquartered in New York, and is responsible for creating standardised
contracts such as the ISDA Master Agreement, standardised asset class provisions
such as the 2014 ISDA Credit Derivatives Definitions (the “Credit Derivatives
Definitions”) and the 2002 ISDA Equity Derivatives Definitions (the “Equity
Derivatives Definitions”) and a wide range of related documentation, that are used
to enter into derivatives transactions. Definitions, confirmations and other documents
and information published by ISDA are available on ISDA’s website:
http://www2.isda.org/. Certain publications are available free of charge while others
are available to subscribers of the website only.
At the date of this Prospectus, ISDA has more than 800 member institutions from 59
countries on six continents. These members include a broad range of OTC
derivatives market participants: global, international and regional banks, asset
managers, energy and commodities firms, government and supra-national entities,
insurers and diversified financial institutions, corporations, law firms, exchanges,
clearing houses and other service providers.
Who
is
the Credit Suisse International will act as Calculation Agent for the Notes and the Swap
Calculation Agent? Agreement for so long as it maintains the role of Swap Counterparty (and, by
extension, each of the Credit Default Swap Transactions and Equity Swap
Transactions thereunder).
What is the role of
the
Calculation
Agent
and
the
Issuer in deciding
certain
issues
related
to
the
Notes?
The Calculation Agent under the Swap Agreement may exercise certain discretions
and make certain determinations relating to the Notes, including (but not limited to)
the following: (i) determination of whether an Event Determination Date has
occurred with respect to a Reference Entity, whether or not the CDDC has
considered such determination, (ii) determination of whether there is a Successor
with respect to a Reference Entity, whether or not the CDDC has considered such
determination, and (iii) where auction settlement does not apply, the right to
determine the value of the obligations selected for determination of the Final Price on
the basis of bid quotations from third party dealers.
Noteholders should note that any determination and/or calculation by the Calculation
Agent will, in the absence of manifest error, be final and binding on the Trustee and
Noteholders.
Where a CDDC has made a determination as to whether an Event Determination
Date or there is a Successor with respect to the Reference Entity, the Calculation
87
Agent may apply the same determination for the purposes of the Notes.
Can
my
Notes Yes. This may occur in respect of a Class of Notes if any of the following events
redeem in full prior happen:
to the Maturity
(a)
the Credit Default Swap Transaction and the Equity Swap Transaction
Date?
relating to such Class are terminated, or the Swap Agreement as a whole is
terminated;
(b)
upon the occurrence of certain insolvency events in respect of the Swap
Counterparty, the occurrence of an Event of Default or a Termination Event
(each as defined in the Swap Agreement), the occurrence of a Termination
Event (as defined in the Swap Agreement) in respect of any Credit Default
Swap Transaction or Equity Swap Transaction where the Issuer has the right
to terminate such transaction or the occurrence of certain credit rating
downgrading or withdrawal events in respect of the Swap Counterparty, no
replacement Swap Counterparty is appointed within 30 calendar days of such
event;
(c)
certain tax events occur in respect of payments due by the Issuer under the
Notes of all Classes, but not instances where (x) withholding or deduction of
taxes on the Notes arises solely in respect of FATCA; (y) withholding or
deduction of taxes on the Notes arises solely as a result of the Noteholder’s
connection with the jurisdiction of incorporation of the Issuer (otherwise
than by reason of the holding of any Note or receiving any payment in
respect thereof); and (z) a withholding or deduction is imposed pursuant to
European Council Directive 2003/48/EC (or any other directive
implementing the conclusions of the ECOFIN Council Meeting of 26-27
November 2000);
(d)
it becomes unlawful for the Issuer to perform any of its obligations under the
Notes of all Classes, hold any Collateral (or receive payment in respect of
any Collateral) or to comply with any material provision of any agreement
entered into in connection with the Notes of all Classes;
(e)
an Event of Default occurs in respect of such Class of Notes; or
(f)
the Trustee enforces the security following the occurrence of an Enforcement
Event in respect of the other Class of Notes.
Upon the occurrence of one of the events listed above, the Notes of each Class held
by a Noteholder will be due to be redeemed by payment to such holder of a pro rata
share of the relevant Early Cash Redemption Amount applicable to such Class. A
description of the calculation of the Early Cash Redemption Amount is set out in the
section of this Prospectus entitled “Description of the Swap Agreement”.
Will the Notes be No. The Notes are not rated by any rating agency.
rated?
Will there be a Credit Suisse Securities (Europe) Limited, Credit Suisse International, Credit Suisse
secondary market AG, or any of their respective agents may purchase Notes subject to all regulatory
requirements and the internal policies and procedures of Credit Suisse Securities
in the Notes?
(Europe) Limited, Credit Suisse International, Credit Suisse AG or such agent (as
applicable). However, no assurance is given that this will be the case and investors
should be prepared to retain the Notes until their maturity.
88
What tax will I
have to pay and
how will tax affect
payments made to
me?
General information relating to certain aspects of Luxembourg, Swedish and Irish
taxation, to the extent applicable to you, is set out under the headings “Luxembourg
Taxation”, “Swedish Taxation” and “Irish Taxation” in this Prospectus.
In addition, general information relating to certain aspects of United Kingdom and
Swiss taxation, to the extent applicable to you, is set out under the heading
“Taxation” in the Base Prospectus.
If withholding taxes are imposed on payments under the Notes (as described in more
detail in the terms and conditions), the Issuer will not pay any additional amounts to
“gross-up” such payments.
The Issuer will not be liable for or otherwise obliged to pay any tax, duty,
withholding or other payment (including any stamp or transfer tax) which may arise
as a result of the ownership, transfer, exercise or enforcement of any Note by any
person and all payments made by the Issuer will be made subject to any such tax,
duty, withholding or other payment which may be required to be made, paid,
withheld or deducted. For the avoidance of doubt, the Issuer will not assume any
responsibility for such withholding or deduction. If any such taxes apply (subject to
certain exceptions including, but not limited to where withholding or deduction of
taxes on the Notes arises solely in respect of FATCA), the Notes will be redeemed
early as described under “Can my Notes redeem in full prior to the Maturity Date?”
above and elsewhere in this Prospectus.
Noteholders must also carefully review, and understand, the risk factor in the section
of this Prospectus entitled “Risk Factors” under the heading “Possibility of U.S.
withholding tax on payments”.
The tax treatment of the Notes for individual Noteholders may vary significantly.
The general information regarding taxation set out in this Prospectus and the Base
Prospectus does not consider the implications of a holding of the Notes for individual
Noteholders based upon their specific circumstances. Accordingly, you must consult
with your tax advisers (along with your legal and financial advisers) prior to making
an investment in any of the Notes.
89
DOCUMENTS INCORPORATED BY REFERENCE
The provisions of the base prospectus dated 23 December 2013 relating to the Secured Note Programme of
the Company (the “Base Prospectus”), which has previously been published and have been filed with the
CSSF and the Central Bank, issued by the Issuer in respect of the Programme, but excluding the “Summary”
on pages 6 to 16 of the Base Prospectus, the section entitled “Description of the Swap Counterparty” on page
136 and the section entitled “The Swap Agreement” on pages 138 to 141 of the Base Prospectus, shall be
incorporated in, and form part of, this Prospectus.
For the purpose of this Prospectus, references in the Base Prospectus to the applicable Issue Terms or
Alternative Drawdown Document (including, for the avoidance of doubt, within the sections thereof
incorporated by reference and forming part of this Prospectus) shall be to the provisions set out below under
“Issue Terms”. In the event of any inconsistency between the Issue Terms and this Prospectus and the Master
Conditions or Base Prospectus, the Issue Terms and this Prospectus will prevail. The Base Prospectus is
available for viewing at the following link:
http://ise.ie/debt_documents/Base%20Prospectus_d67b15bb-04c3-4a1f-9722-8abb56c5aa38.PDF
The audited financial statements of the Issuer for the financial year ended 31 December 2013 (the “2013
Accounts”) are incorporated in, and form a part of this Prospectus. There has been no material adverse
change in the prospects of the Issuer since 31 December 2013, being the date of the Issuer’s last audited
financial statements.
The 2013 Accounts are available at the following link:
http://www.argentumcapital.lu/pdfs/financial/2013-1231%20Argentum%20Financial%20Statements%20FULL%20SIGNED.pdf
The non-incorporated parts of the documents incorporated by reference are either not relevant for
prospective investors in the Notes or covered elsewhere in this Prospectus.
Following the publication of this Prospectus, a supplement may be prepared by the Issuer and approved by
the Central Bank in accordance with Article 16 of the Prospectus Directive. Statements contained in any
such supplement (or contained in any document incorporated by reference therein) shall, to the extent
applicable (whether expressly, by implication or otherwise), be deemed to modify or supersede statements
contained in this Prospectus or in a document which is incorporated by reference in this Prospectus. Any
statement so modified or superseded shall not, except as so modified or superseded, constitute a part of this
Prospectus. Copies of documents incorporated by reference in this Prospectus can be obtained from the
specified office of the Issuing and Paying Agent for the time being in London. In addition, such documents
will be available from the registered office of the Issuer.
The Issuer will, in the event of any significant new factor, material mistake or inaccuracy relating to
information included in this Prospectus which is capable of affecting the assessment of the Notes, prepare a
supplement to this Prospectus.
90
ISSUE TERMS
PART A – CONTRACTUAL TERMS
The Notes will be subject to the Master Conditions as set out in the Base Prospectus dated 23 December
2013 and also to the provisions set out in these issue terms (the “Issue Terms” which include the relevant
schedule(s) attached hereto). References in such Master Conditions to the Issue Terms or Alternative
Drawdown Document shall be to the provisions set out in these Issue Terms. In the case of a discrepancy or
conflict with such Master Conditions, the following Issue Terms shall prevail.
SERIES DETAILS
1.
Issuer:
Argentum Capital S.A. (the “Company”), acting in
respect of its Compartment GAP+ 2047 - 2048
November 2014.
2.
Series Number:
2014-61
This Series comprises two classes (each, a “Class” or
“Class of Notes”). The Notes of each Class will rank
pari passu and without any preference among
themselves and each Class will rank pari passu and
without any preference between the Classes.
A separate compartment has been created by the Board
in respect of the Notes (“Compartment GAP+ 2047 2048 November 2014”). Compartment GAP+ 2047 2048 November 2014 is a separate part of the
Company’s assets and liabilities. The Collateral
(relating to the Notes) is exclusively available to
satisfy the rights of the Secured Creditors (in
accordance with the terms and conditions set out in
these Issue Terms) and the rights of the creditors
whose claims have arisen at the occasion of the
creation, the operation or the liquidation of
Compartment GAP+ 2047 - 2048 November 2014, as
contemplated by the Articles and subject to the order
of priority set out therein.
3.
Specified Currency:
Swedish Krona (“SEK”)
4.
Aggregate Nominal Amount of Notes:
The Aggregate Nominal Amount of the Series as at the
Issue Date shall be up to SEK 400,000,000 (the
“Initial Aggregate Nominal Amount”).
At any time after the Issue Date, the Aggregate
Nominal Amount of the Series shall be the aggregate
of the Outstanding Principal Amounts of each Class as
at such date.
The Outstanding Principal Amounts of each Class of
Notes as at the Issue Date shall be as follows:
(a)
91
Class A: up to SEK 200,000,000 (the “Class A
Notes”); and
(b)
Class B: up to SEK 200,000,000 (the “Class B
Notes”).
The Initial Aggregate Nominal Amount of the Notes,
together with the respective Outstanding Principal
Amount of the Class A Notes and the Class B Notes, in
each case, as at the Issue Date, will be specified in the
Issue Deed in respect of the Notes.
The Outstanding Principal Amount of each Class and,
accordingly, the Aggregate Nominal Amount of the
Notes is also subject to reduction at any time and from
time to time as a result of any purchase and
cancellation of Notes of that Class pursuant to Master
Conditions 8(n) (Purchases) and 8(o) (Cancellation).
5.
Issue Price:
100 per cent. of the Outstanding Principal Amount of
each Class of Notes as at the Issue Date.
6.
(i)
Specified Denominations:
SEK 10,000
(ii)
Calculation Amount
SEK 10,000
(i)
Issue Date:
16 December 2014
(ii)
Interest
Date:
7.
8.
Maturity Date:
Commencement In respect of each Class of Notes: Not Applicable.
In respect of each Class of Notes, the latest of:
(a)
the later of (i) 30 December 2020, subject to
adjustment in accordance with the Following
Business Day Convention; and (ii) the
Reference Business Day immediately following
the Swap Counterparty Equity Final Exchange
Date in respect of the Equity Swap Transaction
relating to such Class (which is expected to be
the Reference Business Day immediately
preceding 30 December 2020, unless there are
any postponements and/or adjustments in
respect thereof pursuant to the terms of such
Equity Swap Transaction) (the “Scheduled
Maturity Date”);
(b)
the latest Credit Event Instalment Date falling
after the Scheduled Maturity Date relating to
such Class (if any); and
(c)
the Extended CDS Maturity Date relating to
such Class (if any).
A Noteholder of any Class will not receive any
compensation as a result of the Maturity Date falling
after 30 December 2020.
9.
Interest Basis:
In respect of each Class of Notes: Not Applicable.
92
10.
Redemption/Payment Basis:
In respect of each Class of Notes:
(a)
upon the occurrence of a Triggered Credit Event
in respect of a Reference Entity under the Credit
Default Swap Transaction relating to such
Class, each Note of such Class will be redeemed
in whole or in part, as the case may be, on each
Credit Event Instalment Date at the Credit Event
Instalment Amount (as described in paragraph 1
of Schedule 2 to these Issue Terms) and, in each
case, the Outstanding Principal Amount of such
Class will be reduced by an amount equal to the
Reference Entity Notional Amount (or, in
respect of a Relevant Restructuring, an amount
equal to the product of the Reference Entity
Notional Amount and the Exercised Percentage)
(as determined pursuant to such Credit Default
Swap Transaction) of the Reference Entity to
which such Triggered Credit Event relates. If
there is a Triggered Credit Event outstanding as
at the Credit Event Observation Period End
Date for which the Credit Event Instalment Date
relating thereto will fall on or after the
Scheduled Maturity Date, the Outstanding
Principal Amount of such Class shall be deemed
to have been reduced in accordance with the
foregoing as at the Credit Event Observation
Period End Date solely for the purpose of
calculating the Partial Final Redemption
Amount (if any) or the Final Redemption
Amount (if any) in respect of such Class;
(b)
each Note of such Class may also be redeemed
on the Scheduled Maturity Date either in whole
or in part at the Final Redemption Amount or
the Partial Final Redemption Amount (if any),
as applicable, in accordance with paragraph 18
of Part A of these Issue Terms. In respect of
each Note of such Class, following the payment
of the Final Redemption Amount or the Partial
Final Redemption Amount (if any), as the case
may be, the Outstanding Principal Amount of
such Class shall be reduced by an aggregate
amount equal to the Reference Entity Notional
Amount (as determined pursuant to such Credit
Default Swap Transaction) of each such
Reference Entity to which such payments
related; and
(c)
if there is an Unsettled Credit Event outstanding
as at the Credit Event Observation Period End
Date, each Note of such Class will be redeemed
in whole or in part, as the case may be, on each
Unsettled Credit Event Instalment Date at the
Unsettled Credit Event Instalment Amount (as
93
described in paragraph 2 of Schedule 2 to these
Issue Terms) and, in each case, the Outstanding
Principal Amount of such Class will be reduced
by an amount equal to the Reference Entity
Notional Amount (or, in respect of a Relevant
Restructuring, an amount equal to the product of
the Reference Entity Notional Amount and the
Exercised Percentage) (as determined pursuant
to the Credit Default Swap Transaction relating
to such Class) of the Reference Entity to which
such Unsettled Credit Event Instalment Date
relates,
provided that, where the Outstanding Principal
Amount of a Class of Notes would otherwise be
reduced to zero prior to the Scheduled Maturity Date
as a result of the occurrence of any Triggered Credit
Events, SEK 1 of such Class of Notes shall remain
outstanding so as to enable any portion of the Partial
Final Redemption Amount or the Final Redemption
Amount, as applicable, attributable to an Additional
Payout Amount to be payable to the holders of such
Class on the Scheduled Maturity Date.
11.
Date Board approval for issuance of The issue of the Notes has been authorised by the
Notes obtained:
Board on or about the Issue Date.
12.
Method of distribution:
Non-syndicated.
PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE
13.
Fixed Rate Note Provisions:
Not Applicable.
14.
Floating Rate Note Provisions:
Not Applicable.
15.
Zero Coupon Note Provisions:
Not Applicable.
16.
Default Interest:
Not Applicable.
MORTGAGED PROPERTY
17.
Mortgaged Property:
(i)
Original Collateral:
Not Applicable.
(ii)
Swap Agreement:
Applicable. The Issuer and the Swap Counterparty will
enter into a 2002 ISDA Master Agreement and
Schedule thereto in the form of the Master Swap
Terms dated 23 December 2013) to be dated as of a
date on or about the Issue Date, as supplemented by (a)
a confirmation evidencing a credit default swap
transaction relating to each Class of Notes (in respect
of each Class, the “Credit Default Swap
Transaction” relating to such Class) between the
Issuer and the Swap Counterparty; (b) a confirmation
evidencing an equity swap transaction relating to the
94
Class A Notes (the “Class A Equity Swap
Transaction”) and an equity swap transaction relating
to the Class B Notes (the “Class B Equity Swap
Transaction”, and together with the Class A Equity
Swap Transaction, the “Equity Swap Transactions”,
and each an “Equity Swap Transaction” relating to
the relevant Class), each between the Issuer and the
Swap Counterparty; and (c) the Credit Support Annex
(together, the “Swap Agreement”).
The confirmations evidencing each Credit Default
Swap Transaction and Equity Swap Transaction are
available for inspection at the registered office of the
Company and at the specified offices of the Issuing
and Paying Agent and the Registrar during normal
business hours (with respect to the location of the
relevant office) on any weekday (Saturdays, Sundays
and public holidays excepted).
Upon the occurrence of a Replacement Event, one or
more replacement Swap Agreement(s) may be entered
into as provided in paragraph 5 of Schedule 2 to these
Issue Terms.
(iii)
Swap Counterparty:
Credit Suisse International
(iv)
Credit Support Annex:
Applicable. An ISDA Credit Support Annex (Bilateral
Form – Transfer) (English Law) (containing the
paragraph 11 elections set out in the Master CSA
Terms dated 23 December 2013, as amended and
supplemented by the Issue Deed) to be dated on or
about the Issue Date and will be entered into between
the Issuer and the Swap Counterparty.
(v)
Original
Substitution:
(vi)
Luxembourg Pledge:
Collateral Not Applicable.
The security described in the Base Prospectus will be
granted subject, and in addition, to the Issuer’s pledge
to the Trustee of all the Pledged Collateral held with
the Custodian in respect of the Series and
Compartment and the grant by it to the Trustee of a
security interest (“gage”) over such Pledged Collateral
under Luxembourg law (the “Luxembourg Pledge”).
The Luxembourg Pledge shall, for the avoidance of
doubt, form part of the Security. For this purpose:
“Pledged Accounts” means each Securities Account
and Cash Account (in each case as defined in the
Agency Agreement) opened by the Custodian for the
Issuer in respect of the Series; and
“Pledged Collateral” means all the present and future
assets, rights and claims the Issuer has or will have in
relation to the Pledged Accounts, including, for the
avoidance of doubt, securities, cash and other rights
95
and the property held therein or credited thereto and
the proceeds and products thereof and property
received, receivable or otherwise distributed in respect
of the Pledged Accounts and the property held therein
and any assets from time to time subject, or expressed
to be subject, to the Luxembourg law governed pledge
created or expressed to be created by the Issue Deed or
any part of those assets.
PROVISIONS RELATING TO REDEMPTION
18.
Final Redemption Amount of each Master Condition 8(a) (Final Redemption) shall be
Note:
deleted in its entirety and replaced with the following:
“Final Redemption: Provided that the Notes have not
been previously redeemed in whole, each Note (or, if
applicable, a part thereof) of each Class of Notes will
be redeemed by the Issuer on the Scheduled Maturity
Date by payment of an amount in respect of such Note
equal to:
(i) where there is no Reference Entity in respect of
which (A) an Unsettled Credit Event is outstanding
as at the Credit Event Observation Period End
Date or (B) a Triggered Credit Event is
outstanding as at the Credit Event Observation
Period End Date for which the Credit Event
Instalment Date relating thereto falls on or after the
Scheduled Maturity Date, the Final Redemption
Amount (if any); or
(ii) where there is any Reference Entity in respect of
which there is any such Unsettled Credit Event or
Triggered Credit Event, the Partial Final
Redemption Amount (if any), provided that a
further amount may be payable on any Credit
Event Instalment Date (if any) or Unsettled Credit
Event Instalment Date (if any), as applicable,
falling on or after the Scheduled Maturity Date in
accordance with paragraphs 1 and 2 of Schedule 2
to these Issue Terms respectively.”
19.
Redemption by Instalments:
The Notes may be redeemed by instalments as set out
in paragraph 1 of Schedule 2 to these Issue Terms
(following a Triggered Credit Event, in which case a
Credit Event Instalment Amount shall be payable) or
paragraph 2 of Schedule 2 to these Issue Terms
(following an Unsettled Credit Event, in which case an
Unsettled Credit Event Instalment Amount shall be
payable in respect of each Note).
Each Instalment Amount shall be the amount payable
in accordance with such paragraph 1 or paragraph 2 of
Schedule 2 and the Outstanding Principal Amount of
each Class of Notes will be reduced in accordance with
paragraph 10 of Part A of these Issue Terms above,
96
notwithstanding anything to the contrary in Master
Condition 8(b) (Redemption by Instalments).
20.
Early Cash Redemption Amount:
In respect of each Class of Notes, the Early Cash
Redemption Amount in respect of a Note of such Class
will be its pro rata share of:
(a)
where one or more Swap Transactions shall
remain outstanding under a Swap Agreement
following the early redemption of the Class of
Notes, any Termination Payment payable to the
Issuer (as determined pursuant to the Swap
Agreement) in respect of the relevant Class
Terminated Transaction(s) (or the portion of
the Termination Payment attributable thereto,
as determined by the Calculation Agent in its
sole and absolute discretion and acting in a
commercially reasonable manner, where Swap
Transactions in addition to the Class
Terminated Transaction(s) are also terminated
on the same Early Termination Date under the
Swap Agreement), together, if applicable, with
any interest payable thereon,
which
Termination Payment for the avoidance of
doubt shall not take into account any Unpaid
Amounts in connection with the Credit Support
Balance of either party under the Credit
Support Annex; or
(b)
where no Swap Transactions shall remain
outstanding under the Swap Agreement
following the early redemption of the Class of
Notes, the result of the following:
97
(i)
the Class Redemption Portion of the
Specified Currency Proceeds realised in
respect of the Collateral deriving from
the CSA Posted Collateral in respect
such Swap Agreement; plus
(ii)
any Termination Payment payable to
the Issuer (as determined pursuant to
the Swap Agreement) in respect of the
Class Terminated Transaction(s) (or the
portion of such a Termination Payment
attributable thereto, as determined by
the Calculation Agent in its sole and
absolute discretion and acting in a
commercially
reasonable
manner,
where Swap Transactions in addition to
the Class Terminated Transaction(s) are
also terminated on the same Early
Termination Date under the Swap
Agreement) together, if applicable, with
any interest payable thereon; minus
(iii)
any Termination Payment payable to
the Swap Counterparty (as determined
pursuant to the Swap Agreement) in
respect of the Class Terminated
Transaction(s) (or the portion of such a
Termination
Payment
attributable
thereto, as determined by the
Calculation Agent in its sole and
absolute discretion and acting in a
commercially
reasonable
manner,
where Swap Transactions in addition to
the Class Terminated Transaction(s) are
also terminated on the same Early
Termination Date under the Swap
Agreement) together, if applicable, with
any interest payable thereon,
and, for the avoidance of doubt, the
Termination Payment referred to in subparagraphs (ii) and (iii) shall take into account
any Unpaid Amounts in connection with the
Credit Support Balance of either party under
the Credit Support Annex.
For the purpose of the above:
“Class Redemption Portion” means, in respect of a
Class of Notes that is redeeming early and a Swap
Agreement relating thereto, a fraction reflecting the
proportion of the Exposure of the Issuer to the Swap
Counterparty under such Swap Agreement that is
attributable to the Class Terminated Transaction(s)
relating to such Class.
“Class Terminated Transaction” means, in respect of
a Class of Notes that is redeeming early and a Swap
Agreement, the Equity Swap Transaction and/or Credit
Default Swap Transaction relating to such Class that
has been entered into under such Swap Agreement
21.
Early
Redemption
Method:
Settlement Cash Settlement, subject to the provisions set out in
these Issue Terms.
22.
Additional Redemption Event:
Applicable.
An Additional Redemption Event occurs in respect of
each Class of Notes if the Trustee enforces the Security
following the occurrence of an Enforcement Event in
respect of the other Class of Notes in accordance with
Master Condition 14 (Enforcement of Security),
including where such enforcement is directed by an
Extraordinary Resolution given by the holders of such
other Class of Notes.
98
PRODUCT SUPPLEMENTS AND ADDITIONAL CONDITIONS
23.
Applicable Product Supplement:
Not Applicable. The additional provisions contained in
Schedules 1 to 3 to these Issue Terms amend the
Master Conditions.
24.
Pass-through Notes:
Not Applicable.
PROVISIONS RELATING TO DISPOSAL AGENT
25.
Disposal Agent:
Credit Suisse International
26.
Liquidation:
See paragraph 3 of Schedule 2 to these Issue Terms.
27.
Disposal Agent Fee:
No.
GENERAL PROVISIONS APPLICABLE TO THE NOTES
28.
Form of Notes:
(i)
Bearer or Registered:
Registered Notes:
Global Certificates in respect of each Class of Notes up
to SEK 200,000,000 in nominal amount in respect of
the Class A Notes and up to SEK 200,000,000 in
nominal amount in respect of the Class B Notes, in
each case, registered in the name of a nominee for a
common depositary for Euroclear and exchangeable
for Certificates in the limited circumstances specified
in the respective Global Certificate for each Class of
Notes.
(ii)
The Issuer intends to permit Not Applicable.
indirect interests in the Notes to be
held through the CREST Depositary
Interests to be issued through the
CREST Depositary:
29.
Applicable TEFRA exemption:
Not Applicable.
30.
New Global Note:
No.
31.
Business Centre(s)
Centre(s):
/
Financial For the purpose of Master Condition 9(d) (Business
Day Convention), a “Business Day” shall mean a
Reference Business Day as defined in Master
Condition 1(a) (Definitions).
Notwithstanding anything to the contrary in the Master
Conditions or these Issue Terms, the definition of
Business Day shall also include a day on which the
TARGET System is open for the settlement of
payments in euro.
32.
Reference Business Day:
London, Stockholm and TARGET Settlement Day.
33.
Trustee:
BNY Mellon Corporate Trustee Services Limited
99
34.
Agents:
(i)
Calculation Agent:
Credit Suisse International
One Cabot Square
London E14 4QJ
(ii)
Custodian:
The Bank of New York Mellon (Luxembourg) S.A.
2-4 rue Eugène Ruppert
Vertigo Building – Polaris
L-2453 Luxembourg
(iii)
Disposal Agent:
Credit Suisse International
One Cabot Square
London E14 4QJ
(iv)
Issuing and Paying Agent:
The Bank of New York Mellon, acting through its
London Branch
One Canada Square
London E14 5AL
(v)
Registrar:
The Bank of New York Mellon (Luxembourg) S.A.
2-4 rue Eugène Ruppert
Vertigo Building – Polaris
L-2453 Luxembourg
(vi)
Transfer Agent(s):
The Bank of New York Mellon (Luxembourg) S.A.
2-4 rue Eugène Ruppert
Vertigo Building – Polaris
L-2453 Luxembourg
(vii)
Listing Agent:
Arthur Cox Listing Services Limited
Earlsfort Centre
Earlsfort Terrace
Dublin 2
Ireland
(viii)
Swedish Agent:
Skandinaviska Enskilda Banken AB (publ)
Kungsträdgårdsgatan 8
SE-106 40 Stockholm
Kingdom of Sweden
DISTRIBUTION
35.
(i)
If syndicated,
Managers:
names
of Not Applicable.
(ii)
Stabilising
any):
Manager(s)
(if Not Applicable.
36.
If non-syndicated, name of Dealer:
Credit Suisse International
37.
Non-exempt Offer:
An offer of the Notes may be made by Garantum
Fondkommission AB (the “Financial Intermediary”)
other than pursuant to Article 3(2) of the Prospectus
Directive in the Kingdom of Sweden (“Public Offer
Jurisdiction”) during the period from 17 October 2014
100
until 20 November 2014 (“Offer Period”).
See further Paragraph 6 of Part B – “Other
Information” below.
38.
Fees and Commissions:
The Dealer is entitled to annual commissions which are
payable by the Issuer. In order to satisfy the payment
of these commissions, the notional amount of each of
the Credit Default Swap Transaction and the Equity
Swap Transaction in respect of each Class (and,
therefore, amounts due from the Swap Counterparty
under each swap transaction) is reduced by
approximately 1% on an annual basis. These
reductions have the effect of reducing the obligations
of, and therefore releasing value to, the Swap
Counterparty, which value the Swap Counterparty will
account for to the Dealer in satisfaction of the Issuer’s
obligations to pay the commissions. These reductions
are effected through the application of the Fee
Calculation Factor (described in paragraphs (a) and (b)
below). The Dealer is also entitled to a commission
payable by the Issuer upon payment by the Swap
Counterparty of an amount equal to the relevant Swap
Counterparty Equity Final Exchange Amount under
each Equity Swap Transaction and which is satisfied
by a deduction of the Performance Fee in the
calculation of such amount (as described in paragraph
(c) below). The Performance Fee in respect a Class is
equal to 10% of such amount by which the Swap
Counterparty Equity Final Exchange Amount (prior to
the deduction of such Performance Fee in its
calculation) receivable by the Issuer under the Equity
Swap Transaction relating to that Class exceeds 5.4%
of the Aggregate Nominal Amount of such Class. The
Swap Counterparty will account to the Dealer for an
amount equal to any such Performance Fee in
satisfaction of the Issuer’s obligation to pay such
additional commission.
The commissions will comprise such amounts
generated by (a) the application of the Fee Calculation
Factor to the Class Notional Amount or Reference
Entity Notional Amount in the calculation of any
amounts receivable by the Issuer under each Credit
Default Swap Transaction, (b) the application of the
Fee Calculation Factor to the Swap Notional Amount
in the calculation of any Swap Counterparty Equity
Final Exchange Amount receivable by the Issuer in
respect of each Equity Swap Transaction and (c) the
deduction of any Performance Fee in the calculation of
any Swap Counterparty Equity Final Exchange
Amount (prior to the relevant Additional Payout
Amount being paid in respect of such Class) which
will ultimately depend, in part, on the Equity Swap
Transaction referencing the performance of the
101
relevant Class Equity Basket.
On each Annual Determination Date (being each of 30
December 2015, 30 December 2016, 30 December
2017, 30 December 2018, 30 December 2019 and 30
December 2020), in accordance with paragraphs (a)
and (b) above, the application of the Fee Calculation
Factor decreases the existing Class Notional Amount
and/or Reference Entity Notional Amount of each
Credit Default Swap Transaction and reduces any
Additional Payout Amount that would be payable
under each Class of Notes. The amounts generated by
these reductions are accounted for to the Dealer in
respect of commissions payable by the Issuer, together
with the Performance Fee in (c) above, which is
payable where the Swap Counterparty Equity Final
Exchange Amount (prior to the deduction of such
Performance Fee in its calculation) receivable by the
Issuer under the Equity Swap Transaction relating to
that Class exceeds 5.4% of the Aggregate Nominal
Amount of the relevant Class and is equal to 10% of
any amount payable which is in excess of 5.4% of such
Aggregate Nominal Amount.
The Dealer will use each such commissions payable by
the Issuer to pay corresponding commissions to the
Distributor. The commissions payable to the
Distributor that correspond to amounts described in (a)
above will be paid by the Dealer to the Distributor in
respect of the issue of the Notes on the fifth Business
Day following each Annual Determination Date (as
described above). The commissions described in (b)
and (c) above are payable on the scheduled maturity
Date of the Notes or, if applicable, the relevant Early
Redemption Date of the Notes.
Notwithstanding the above, the Dealer and the
Distributor have agreed that if any portion of the Notes
is held by the Dealer and/or any of its affiliates, the
amount required to be paid to the Distributor will be
reduced by the proportion which such portion of Notes
held by the Dealer and/or its affiliates bears to all of
the outstanding Notes.
39.
Additional Selling Restrictions:
Sweden
Each of the Issuer, Credit Suisse International as
Dealer, Garantum Fondkommission AB as Distributor,
and any authorised offeror has represented and agreed
that the Notes have not been offered or sold and will
not be offered, sold or delivered directly or indirectly
in the Kingdom of Sweden by way of public offering,
unless in compliance with the Swedish Financial
Instruments Trading Act (Sw. lag (1991:980) om
handel med finansiella instrument), as amended from
time to time.
102
PART B – OTHER INFORMATION
1.
LISTING:
Listing and admission to trading:
2.
RATINGS:
Ratings:
3.
Application has been made by the Issuer (or on its
behalf) for the Notes to be listed on the Official List of
the Irish Stock Exchange and admitted to trading on the
Irish Stock Exchange’s regulated market with effect
from the Issue Date. Application has also been made
for the Notes to be admitted to trading and listed on the
regulated market of the Stockholm Stock Exchange.
The Notes will not be rated.
INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUE:
Save for the fees payable to the Dealer and the Distributor, so far as the Issuer is aware, no
person involved in the issue of the Notes has an interest material to the issue.
4.
5.
REASONS FOR THE OFFER, ESTIMATED NET PROCEEDS AND TOTAL
EXPENSES:
(i)
Reasons for the offer:
See the section entitled “Use of Proceeds” in the Base
Prospectus.
(ii)
Estimated net proceeds:
Up to SEK 400,000,000
(iii)
Estimated total expenses:
EUR 3,000
OPERATIONAL
INFORMATION
ISIN Code:
In respect of the Class A Notes: XS1120892176
In respect of the Class B Notes: XS1120892416
Common Code:
In respect of the Class A Notes: 112089217
In respect of the Class B Notes: 112089241
Clearing system(s) and any relevant Euroclear Bank S.A./N.V. and Clearstream Banking,
identification number(s):
S.A. Luxembourg.
Euroclear Sweden AB of Box 191, SE-103 23,
Stockholm will also act as accountholder at Euroclear.
Delivery:
Delivery free of payment.
Intended to be held in a manner No.
which would allow Eurosystem
eligibility:
103
6.
TERMS AND CONDITIONS OF THE OFFER
Offer Price:
In respect of each Class of Notes, the Issue Price in
respect of such Class plus a subscription fee of up to
2% of such Issue Price. Such subscription fee shall be
charged by and payable to the Distributor, and, for the
avoidance of doubt, shall not be payable by the Issuer
or the Swap Counterparty.
Conditions to which the offer is Offers of the Notes are conditional upon their issue and
subject:
the early closure of the Offer Period.
The Issuer reserves the right for any reason to close the
Offer Period early.
Any early closure of the Offer will be published on the
Irish Stock Exchange’s website (www.ise.ie).
Description
process:
of
the
application A prospective investor should contact the Distributor
during the Offer Period. The Issuer has the right to
close the Offer Period early. A prospective investor
will acquire the Notes in accordance with the
arrangements existing between the Distributor and its
customers relating to the subscription of securities
generally and not directly with the Issuer or the Dealer.
Persons interested in purchasing Notes should contact
their financial adviser. If an investor in any jurisdiction
other than Sweden wishes to purchase Notes, such
investor should (a) be aware that sales in the relevant
jurisdiction may not be permitted due to selling
restrictions and thus that the application may be
rejected by the Distributor; and (b) contact its financial
adviser, bank or financial intermediary for more
information.
Details of the minimum and/or The minimum amount of an application in respect of
maximum amount of application:
any Class of Notes is SEK 10,000. Any application in
respect of any Class of Notes in excess of SEK 10,000
must be in respect of integral multiples of SEK 10,000.
Description of possibility to reduce The Issuer has the right to terminate the Offer Period at
subscriptions:
any time and not proceed with the issuance.
Any early closure of the Offer will be published on the
Irish Stock Exchange’s website (www.ise.ie).
Details of the method and time limits The Notes will be issued on the Issue Date against
for paying up and delivering the payment to the Issuer of the net subscription moneys
Notes:
by debit of a cash account on or before the Issue Date
or in accordance with the procedures specified by the
Distributor. Allotted Notes will be delivered to a
securities account of each Noteholder as soon as
practicable after the Issue Date.
104
Manner in and date on which results The precise Aggregate Nominal Amount of Class A
of the offer are to be made public:
Notes and the Class B Notes will be published on the
website of the Irish Stock Exchange (www.ise.ie) and
filed with the Central Bank of Ireland in accordance
with Article 8 of the Prospectus Directive in each case
on or around the Issue Date.
Procedure for exercise of any right Not Applicable.
of pre-emption, negotiability of
subscription rights and treatment of
subscription rights not exercised:
Categories of potential investors to Offers may be made by the Distributor in Sweden to
which the Notes are offered and any person.
whether tranche(s) have been
reserved for certain countries:
Process for notification to applicants Following the end of the Offer Period, the Distributor
of the amount allotted and the will proceed to notify the prospective Noteholders as to
indication whether dealing may the amount of their allotment of the Notes, if any.
begin before notification is made:
Dealing may not begin before notification is made.
Amount of any expenses and taxes Taxes charged in connection with the subscription,
specifically charged to the subscriber transfer, purchase, or holding of the Notes must be paid
or purchaser:
by the Noteholders. Neither the Issuer nor the
Distributor shall have any obligation in relation thereto.
In this respect, prospective investors must consult
professional tax advisers to determine the tax regime
applicable to their own circumstances.
Subscription fees: In respect of each Class: up to 2%
of the Issue Price of the Notes of such Class, which
will be charged by, and payable to, Garantum
Fondkommission AB in its capacity as Distributor of
the Notes. For the avoidance of doubt, neither the
Issuer nor the Swap Counterparty shall be liable to pay
any subscription fees.
Name(s) and address(es), to the Garantum Fondkommission AB of Norrmalmstorg 16,
extent known to the Issuer, of the Stockholm, Sweden (the “Distributor”) will be the
placers in the various countries sole Distributor in Sweden.
where the offer takes place:
7.
DOCUMENTS ON DISPLAY:
For so long as any Notes remain outstanding, copies of the following documents will, when
published (to the extent applicable), be available in physical form during normal business
hours on any weekday (Saturdays, Sundays and public holidays excepted) at the registered
office of the Company and from the specified offices of the Transfer Agent and Registrar:
(a)
the Articles of the Company;
(b)
the audited financial statements of the Company for the financial year ended 31
December 2013;
105
(c)
the Issue Deed relating to the Notes;
(d)
the Programme Deed (and the documents incorporated therein, including, inter alia, the
Principal Trust Deed, the Agency Agreement, the Dealer Agreement, the Mandate
Agreement and the Repurchase and Cancellation Agreement), as amended from time to
time;
(e)
the confirmations of the Credit Default Swap Transactions and the Equity Swap
Transactions;
(f)
a copy of this Prospectus, together with any other document required or permitted to be
published by the Irish Stock Exchange; and
(g)
any future supplements to this Prospectus.
The Base Prospectus has been published on the Irish Stock Exchange’s website at www.ise.ie.
This Prospectus together with any other document required or permitted to be published by the
Irish Stock Exchange and any future supplements to this Prospectus will be published on the
Irish Stock Exchange’s website at www.ise.ie.
Clearing Systems
The Notes have been accepted for clearance through Euroclear.
The address for Euroclear is 3 Boulevard du Roi Albert II, B.1210 Brussels, Belgium.
The Notes have also been accepted for clearance through Euroclear Sweden.
Significant or Material Change
There has been no significant change in the financial or trading position of the Company and
no material adverse change in the financial position or prospects of the Company since 31
December 2013, being the date of the Company’s last audited financial statements.
Litigation
There are no governmental, legal or arbitration proceedings (including any such proceedings
which are pending or threatened of which the Issuer is aware) since 11 December 2013 (being
the date of incorporation of the Issuer) which may have or have in such period had a significant
effect on the financial position or profitability of the Company.
Company Chairman
Alexandra Fantuz was appointed by the directors of the Company as the chairman of the Board
on 8 August 2014.
Auditors
The approved statutory auditors (réviseurs d’entreprises agréés) of the Company, which have
been appointed by a resolution of the Board dated 2 June 2014 until the date of the meeting of
the Board resolving to submit the annual accounts of the Company for the 2014 financial
period, are PricewaterhouseCoopers, Société coopérative whose address is 400 Route d’Esch,
B.P. 1443, L-1014 Luxembourg and who belong to the Luxembourg institute of auditors
(Instituts des réviseurs d’entreprises). PricewaterhouseCoopers, Société cooperative, in its
capacity as auditors of the Company, have no material interest in the Company.
106
Post-Issuance Information
The Issuer does not intend to provide any post-issuance information in relation to the Notes or
Collateral.
Listing Agent
Arthur Cox Listing Services Limited is acting solely in its capacity as listing agent for the
Issuer in relation to the Notes and is not itself seeking admission of the Notes to the Official
List of the Irish Stock Exchange or to trading on the regulated market of the Irish Stock
Exchange for the purposes of the Prospectus Directive.
8.
CREDIT SUISSE:
Credit Suisse International acts as the Swap Counterparty under the Swap Agreement.
The business of Credit Suisse International is banking and it is regulated as an EU credit
institution by the Financial Conduct Authority of England and Wales. Credit Suisse
International was incorporated in England and Wales under the Companies Act 1985, on 9
May 1990, with registered no. 2500199 and was reregistered as an unlimited company under
the name “Credit Suisse Financial Products” on 6 July 1990, and was renamed Credit Suisse
First Boston International on 27 March 2000 and Credit Suisse International on 16 January
2006. Credit Suisse International’s registered office and principal place of business is at One
Cabot Square, London E14 4QJ, telephone number +44 (0)20 7888 8888. Credit Suisse
International has securities admitted to trading on the Main Securities Market of the Irish Stock
Exchange. Such market is a regulated market for the purposes of the Markets in Financial
Instruments Directive 2004/39/EC.
107
SCHEDULE 1 TO THE ISSUE TERMS – ADDITIONAL DEFINITIONS
The following words and expressions shall be deemed to be inserted as additional definitions in the correct
alphabetical order or, as the case may be, replace the existing definitions, in each case, in Master Condition
1(a) (Definitions):
“99%^Day Count” means 99 per cent. to the power of Day Count.
“Additional Exchange Amount”, in respect of each Class, has the meaning given to such term in the Credit
Default Swap Transaction relating to such Class.
“Additional Exchange Date”, in respect of each Class, has the meaning given to such term in the Credit
Default Swap Transaction relating to such Class.
“Additional Payout Amount” means, in respect of each Note of a Class, its pro rata share of the Swap
Counterparty Equity Final Exchange Amount (if any) receivable by the Issuer under the Equity Swap
Transaction relating to such Class, subject to a minimum of zero.
“Agency Agreement” has the meaning given to it in Master Condition 1(a) (Definitions), as such agreement
may be amended and/or restated from time to time.
“Credit Event”, in respect of each Class, has the meaning given to such term in the Credit Default Swap
Transaction relating to such Class.
“Credit Event Instalment Amount” has the meaning given to such term in paragraph 1 of Schedule 2 to
these Issue Terms.
“Credit Event Instalment Date” means, in respect of each Class, the date falling 2 Reference Business
Days immediately following the relevant Credit Suisse Cash Settlement Date under the Credit Default Swap
Transaction relating to such Class.
“Credit Event Observation Period End Date” means the Reference Business Day immediately preceding
30 December 2020.
“Credit Suisse Cash Settlement Amount”, in respect of each Class, has the meaning given to such term in
the Credit Default Swap Transaction relating to such Class.
“Credit Suisse Cash Settlement Date”, in respect of each Class, has the meaning given to such term in the
Credit Default Swap Transaction relating to such Class.
“Day Count” means a fraction the numerator of which is the number of days in the period from, and
including, the Scheduled Maturity Date to, but excluding, the Additional Exchange Date or the Credit Suisse
Cash Settlement Date, as applicable, and the denominator of which is 360 (the number of days to be
calculated on the basis of a year of 360 days with twelve thirty day months).
“Early Redemption Event” means a Liquidation Event, other than the occurrence of an Early Redemption
Trigger Date owing to the occurrence of a Counterparty Bankruptcy Credit Event.
“Eligible Cash” means cash comprising the CSA Posted Collateral.
“Eligible Securities” means securities comprising the CSA Posted Collateral.
“Exercised Percentage” has the meaning given to such term in paragraph 1 of Schedule 2 to these Issue
Terms.
108
“Extended CDS Maturity Date” means, in respect of each Class, the date falling 2 Reference Business
Days immediately following the Extended CDS Termination Date of the Credit Default Swap Transaction
relating to such Class.
“Extended CDS Termination Date” means, in respect of each Class, has the meaning given to such term in
the Credit Default Swap Transaction relating to such Class.
“Extended Fee Calculation Factor” means the Fee Calculation Factor on the Scheduled Maturity Date
(being 94.60%) multiplied by (99%^Day Count).
“Fee Calculation Factor” means, in respect of the Credit Default Swap Transaction and the Equity Swap
Transaction relating to a Class of Notes, (i) 100% on the Issue Date and (ii) thereafter the relevant
percentage figure corresponding to the date specified in the table below, reflecting an annual reduction in the
relevant notional amount of such swap transaction:
Date
Fee Calculation Factor (%)
From, but excluding, the Issue Date to, and including, 30
December 2015
98.96
From, but excluding, 30 December 2015 to, and including, 30
December 2016
97.97
From, but excluding, 30 December 2016 to, and including, 30
December 2017
96.99
From, but excluding, 30 December 2017 to, and including, 30
December 2018
96.02
From, but excluding, 30 December 2018 to, and including, 30
December 2019
95.06
From, but excluding, 30 December 2019 to, and including, the
Scheduled Maturity Date
94.60
From, but excluding, the Scheduled Maturity Date to, and
including, the Maturity Date
The Extended Fee Calculation
Factor
“Final Redemption Amount” means, in respect of each Note of a Class, the sum of (i) its pro rata share of
an amount equal to 94.60% of the Outstanding Principal Amount of such Class as at the Credit Event
Observation Period End Date and (ii) any Additional Payout Amount in respect of such Note.
“Instalment Amount” means each Credit Event Instalment Amount and Unsettled Credit Event Instalment
Amount, if any.
“Outstanding Principal Amount” means, in respect of each Class, the principal amount of such Class
outstanding from time to time, determined and reduced as such in accordance with paragraphs 4 and 10 of
Part A of these Issue Terms.
“Partial Final Redemption Amount” means, in respect of each Note of a Class, the sum of (i) its pro rata
share of an amount equal to 94.60% of an amount equal to (A) the Outstanding Principal Amount of such
Class as at the Credit Event Observation Period End Date minus (B) if there is an Unsettled Credit Event in
respect of any Reference Entity as at the Credit Event Observation Period End Date, an amount in SEK equal
to the Reference Entity Notional Amount of such Reference Entity and (ii) any Additional Payout Amount in
respect of such Note.
109
“Reference Entity”, in respect of each Class, has the meaning given to such term in the Credit Default Swap
Transaction relating to such Class, as the same may be adjusted from time to time in accordance with the
terms of such Credit Default Swap Transaction.
“Reference Entity Notional Amount”, in respect of each Class and any Reference Entity, has the meaning
given to such term in the Credit Default Swap Transaction relating to such Class, as the same may be
adjusted from time to time in accordance with the terms of such Credit Default Swap Transaction.
“Swap Counterparty Equity Final Exchange Amount”, in respect of each Class, has the meaning given to
such term in the Equity Swap Transaction relating to such Class.
“Swap Counterparty Event” means, in accordance with the terms of the Swap Agreement, the occurrence
of an Event of Default (as defined in the Swap Agreement) with respect to the Swap Counterparty.
“Swap Termination Event” means, in respect of each Class, that an Early Termination Date in respect of
the Credit Default Swap Transaction and the Equity Swap Transaction relating to such Class, as applicable,
has been designated or deemed to have been designated by the Issuer or the Swap Counterparty, as
applicable, under the Swap Agreement for any reason other than (i) as a result of the occurrence of a Swap
Counterparty Event or (ii) as a result of the occurrence of an Early Redemption Trigger Date in respect of the
Notes other than pursuant to Master Condition 8(f) (Redemption for Termination of Swap Agreement).
“Triggered Credit Event” means, in respect of each Class, the occurrence of a Credit Event in respect of a
Reference Entity for which the Swap Counterparty has elected to trigger a settlement under the Credit
Default Swap Transaction relating to such Class and an Auction Final Price, or where the Fallback
Settlement Method is applicable, the Final Price, has been determined in accordance with such Credit
Default Swap Transaction on or prior to the Credit Event Observation Period End Date.
“Unsettled Credit Event” means, in respect of each Class:
(a)
the occurrence of a Credit Event in respect of any Reference Entity for which the Auction Final
Price or, where the Fallback Settlement Method is applicable, the Final Price, has not been
determined in accordance with the Credit Default Swap Transaction on or prior to the Credit Event
Observation Period End Date; or
(b)
an event which, in the sole and absolute determination of the Calculation Agent under the relevant
Credit Default Swap Transaction, has occurred on or prior to the Credit Event Observation Period
End Date and may be a Credit Event in respect of a Reference Entity thereunder, but which has not
been confirmed as being a Credit Event or not as at the Credit Event Observation Period End Date.
“Unsettled Credit Event Instalment Amount” has the meaning given to such term in paragraph 2 of
Schedule 2 to these Issue Terms.
“Unsettled Credit Event Instalment Date” means, in respect of each Class, the date falling 2 Reference
Business Days immediately following the relevant Additional Exchange Date under the Credit Default Swap
Transaction relating to such Class.
110
SCHEDULE 2 TO THE ISSUE TERMS – AMENDMENTS TO MASTER CONDITIONS
1.
Credit Event Redemption
On each Credit Event Instalment Date (which, for the avoidance of doubt, may occur before or after
the Scheduled Maturity Date), the Notes of each Class shall be redeemed in part (or, after the
Scheduled Maturity Date, potentially in whole) by payment by the Issuer of an amount in respect of
each Note of such Class (the “Credit Event Instalment Amount”) equal to such Note’s pro rata
share of an amount equal to the Credit Suisse Cash Settlement Amount receivable by the Issuer
under the Credit Default Swap Transaction relating to such Class on the Credit Suisse Cash
Settlement Date to which such Credit Event Instalment Date relates.
With respect to a Reference Entity, the occurrence of a Restructuring Credit Event in respect of
which either “Restructuring Maturity Limitation and Fully Transferable Obligation Applicable” or
“Modified Restructuring Maturity Limitation and Conditionally Transferable Obligation Applicable”
is specified to be applicable in the Matrix for the Transaction Type relating to such Reference Entity
shall be a “Relevant Restructuring” under the Credit Default Swap Transaction.
If an Event Determination Date occurs as a result of a Relevant Restructuring, the Swap
Counterparty may elect to trigger such Credit Event by notifying the Issuer (copied to the
Calculation Agent and the Issuing and Paying Agent) of the Exercised Percentage it wishes to apply.
For this purpose:
(i)
the “Exercised Percentage” shall be no greater than the relevant Remaining Exercisable
Percentage and deemed to be the relevant Remaining Exercisable Percentage if a greater
percentage is elected, and must, when multiplied by the Initial Class Notional Amount, be
equal to SEK 1,000,000 or an integral multiple thereof; and
(ii)
the “Remaining Exercisable Percentage” means, with respect to a Relevant Restructuring,
100% minus the sum of all Exercised Percentages previously elected by the Swap
Counterparty.
Where the Swap Counterparty has first notified the Issuer of an Exercised Percentage that is less than
100%, the Swap Counterparty may subsequently specify one or more further Exercised Percentages
in respect of such Restructuring (in each case not exceeding the Remaining Exercisable Percentage)
by giving notice to the Issuer (copied to the Issuing and Paying Agent, the Trustee and the
Calculation Agent) at any time prior to the termination date of the Credit Default Swap Transaction.
In such circumstances, the Swap Counterparty’s notice shall be deemed to have been a Credit Event
Notice that has triggered an Event Determination Date on the date of delivery in accordance with the
Notes. The Credit Suisse Cash Settlement Amount shall be determined separately in respect of each
such Exercised Percentage.
2.
Unsettled Credit Event Redemption
On each Unsettled Credit Event Instalment Date (which, for the avoidance of doubt, may occur
before or after the Scheduled Maturity Date), the Notes of each Class shall be redeemed in part (or,
after the Scheduled Maturity Date, potentially in whole) by payment by the Issuer of an amount in
respect of each Note of such Class (the “Unsettled Credit Event Instalment Amount”) equal to
such Note’s pro rata share of an amount equal to the Additional Exchange Amount receivable by the
Issuer under the Credit Default Swap Transaction relating to such Class on the Additional Exchange
Date to which such Unsettled Credit Event Instalment Date relates.
3.
Early Redemption
Notwithstanding the provisions of Master Condition 13 (Liquidation), if an Early Redemption Event
occurs in respect of a Class of Notes, the Disposal Agent shall (in accordance with the Agency
111
Agreement) arrange for the Liquidation of the non-cash Collateral relating to the Swap Agreement
for such Class (and the security created pursuant to the Trust Deed over such Collateral shall
automatically be released for the purposes of permitting such Liquidation), other than with respect to
a Swap Agreement where one or more Swap Transactions would remain outstanding thereunder. The
Class A Notes and the Class B Notes will each be redeemed at their applicable Early Cash
Redemption Amount (as defined in paragraph 20 of Part A of these Issue Terms) on the relevant
Early Redemption Date by payment of such Early Cash Redemption Amount to the Noteholders of
the relevant Class on a pro rata basis.
4.
Treatment of Classes
The Trustee shall treat all Classes as a single Series (without distinction between the Classes, save as
expressly provided herein and, in particular, with respect to certain meetings) and as indicated in
these Issue Terms, the Notes of each Class rank pari passu without any preferences amongst
themselves and each Class ranks pari passu and without any preferences amongst the Classes.
5.
Redemption for Termination of Swap Agreement and Swap Counterparty Replacement
Option
For the purposes of Master Condition 8(f) (Redemption for Termination of Swap Agreement), the
reference to Swap Counterparty Event in item (i) of the second paragraph thereof shall be deemed to
be deleted and instead refer to the occurrence of a Termination Event (as defined in the Swap
Agreement) where the Issuer has the right to designate an Early Termination Date in respect of all
outstanding Credit Default Swap Transactions and Equity Swap Transactions under the Swap
Agreement.
Swap Counterparty Replacement Option
Upon the occurrence of (i) a Counterparty Bankruptcy Credit Event; or (ii) a Swap Counterparty
Event (other than a Counterparty Bankruptcy Credit Event); or (iii) a Termination Event (as defined
in the Swap Agreement) where the Issuer has the right to designate an Early Termination Date in
respect of the Credit Default Swap Transactions (a “CDS Termination Event”); or (iv) a
Termination Event (as defined in the Swap Agreement) where the Issuer has the right to designate an
Early Termination Date in respect of any Equity Swap Transaction (an “Equity Swap Termination
Event”); or (v) the long term senior, unsecured rating assigned by Moody’s Investors Service
Limited (“Moody’s”) to the Swap Counterparty being withdrawn or less than Ba1 or the short term
rating assigned by Moody’s to the Swap Counterparty being less than P-3 (any such downgrade or
withdrawal, a “Moody’s Ba1/P-3 Downgrade” and such event, along with each of a Counterparty
Bankruptcy Credit Event, a Swap Counterparty Event (other than a Counterparty Bankruptcy Event),
a CDS Termination Event and an Equity Swap Termination Event, each a “Replacement Event”),
the Issuer shall not designate an Early Termination Date and shall notify the Noteholder Facilitator
as soon as reasonably practicable upon becoming aware of any such occurrence. Upon receipt by the
Issuer of written directions (such notice to be copied to the Trustee) (a “Replacement Swap
Counterparty Notice”) from Garantum Fondkommission AB (or any successor thereto) (in such
capacity, the “Noteholder Facilitator”) requesting the Issuer to enter into a replacement Swap
Agreement in respect of all Credit Default Swap Transactions and all Equity Swap Transactions or
(in the case of a CDS Termination Event only) in respect of the Credit Default Swap Transactions
and/or (in the case of an Equity Swap Termination Event) in respect of the relevant Equity Swap
Transaction(s) (the “Replacement Swap Agreement”) with a replacement Swap Counterparty (the
“Replacement Swap Counterparty”) designated by the Noteholder Facilitator (and, provided that,
in the case of a Replacement Event that is a Moody’s Ba1/P-3 Downgrade, the Swap Counterparty
has provided its prior written consent to such replacement) the Issuer shall use reasonable efforts to
enter into such Replacement Swap Agreement with such Replacement Swap Counterparty; provided
that (A) such Replacement Counterparty is a reputable financial institution with a place of business
in London which enters into derivative transactions as part of its ongoing business activities and
which has, as a minimum, a long term senior, unsecured rating of Ba1 and/or a short term rating of
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P-3 (or their equivalent ratings, in each case, as assigned by Moody’s) as of the date the
Replacement Swap Agreement is entered into, (B) the Replacement Swap Counterparty must be
satisfactory to the Trustee and the Issuer, (C) the price that the Replacement Swap Counterparty is
willing to pay to, or receive from the existing Swap Counterparty (the “Existing Swap
Counterparty”) is reasonably satisfactory to the Existing Swap Counterparty, and (D) where such
Replacement Swap Counterparty Notice relates to a Replacement Event other than a Moody’s
Ba1/P-3 Downgrade, such Replacement Swap Agreement is entered into within 30 calendar days of
the occurrence of the relevant Replacement Event (and provided such Replacement Event is still
continuing at such time) (such period, the “Replacement Period”).
If the relevant Replacement Swap Agreement is not entered into following a Replacement Event
other than a Moody’s Ba1/P-3 Downgrade within the Replacement Period (including where, in such
circumstances, no Replacement Swap Counterparty Notice is delivered by the Noteholder
Facilitator), the Swap Agreement shall automatically terminate or, in the case of a Termination
Event (as defined in the Swap Agreement) the relevant Credit Default Swap Transaction and/or
Equity Swap Transaction(s) may be terminated in accordance with the terms of the Swap Agreement
and, if a Swap Termination Event has occurred and no Early Redemption Trigger Date or Early
Redemption Event has occurred pursuant to any other applicable Condition, the Issuer shall, as soon
as is practicable (or, in any case, within two Reference Business Days after the end of the
Replacement Period), give an Early Redemption Notice to the Noteholders (the date on which such
Early Redemption Notice is deemed to have been given shall be an “Early Redemption Trigger
Date”).
Following the delivery of such Early Redemption Notice, each Note shall become due and payable
on the related Early Redemption Date. In connection with such redemption of each Note on the
Early Redemption Date, the Disposal Agent shall (in accordance with the Agency Agreement)
arrange for, and administer the sale of any Eligible Securities delivered by the Swap Counterparty to
the Issuer under the Credit Support Annex (and the security created pursuant to the Trust Deed over
such Eligible Securities (if any) shall automatically be released for purposes of permitting such sale).
The Class A Notes and the Class B Notes will be redeemed at their applicable Early Cash
Redemption Amount (as defined in paragraph 20 of Part A of these Issue Terms) on the relevant
Early Redemption Date by payment of such Early Cash Redemption Amount to the Noteholders of
such Class on a pro rata basis.
Any Replacement Swap Agreement shall be entered into on identical terms as the Swap Agreement
(including the relevant Credit Default Swap Transactions and/or Equity Swap Transaction(s) and
Credit Support Annex thereunder), save for such terms as the Issuer and the Replacement Swap
Counterparty, acting in good faith, determine are necessary to reflect the replacement of the Existing
Swap Counterparty with the Replacement Swap Counterparty. If, as a result of any such replacement
there is more than one Swap Agreement and more than one Swap Counterparty, the Conditions and
any other Transaction Document may be amended in such manner as the Issuer, the Trustee and each
relevant Transaction Party considers in good faith necessary in order to effect the same.
On the entry into of the Replacement Swap Agreement, the Swap Agreement with the Existing Swap
Counterparty shall to the extent of the relevant replacement terminate immediately and:
(i)
the amount (if any) due to the Existing Swap Counterparty from the Issuer upon termination
of the Swap Agreement shall be funded out of the amount paid to it by the Replacement
Swap Counterparty and the Existing Swap Counterparty shall have no further claims against
the Issuer or any other party in respect of such amounts; and
(ii)
the amount (if any) due to the Issuer from the Replacement Swap Counterparty upon the
entry into of the Replacement Swap Agreement shall be increased (or, as the case may be,
the amount due from the Issuer to the Replacement Swap Counterparty shall be reduced) by
an amount equal to any fees, costs and/or expenses incurred by the Issuer and/or the Trustee
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in relation to the appointment of the Replacement Swap Counterparty and any Replacement
Agents appointed pursuant to paragraph 6 of this Schedule 2 to these Issue Terms below.
The Replacement Swap Counterparty shall be the Valuation Agent in respect of the credit support
annex entered into in respect of the Replacement Swap Agreement.
Following the entry into of a Replacement Swap Agreement, all references to the Replacement Swap
Counterparty shall be deemed to be the Swap Counterparty for the purposes of these Issue Terms
and any other documentation relating to the Notes (subject as provided above in any case where
there is more than one Swap Agreement and more than one Swap Counterparty). Accordingly, more
than one Replacement Event may occur.
For the avoidance of doubt, and notwithstanding any other provisions of the Issue Deed, Principal
Trust Deed or any other document relating to the Notes, no Swap Termination Event shall occur for
the purposes of Master Condition 8(f) (Redemption for Termination of Swap Agreement) as a result
of the termination of the Swap Agreement and entry into the Replacement Swap Agreement in
accordance with the foregoing and the consent of the Noteholders will not be sought or be required
in connection with a Replacement Event in accordance with the foregoing nor for any amendments
to the Master Conditions or these Issue Terms and any other documentation relating to the Notes that
the Noteholder Facilitator certifies in writing to the Trustee are consequential to and necessary in
connection with the entry into of such Replacement Swap Agreement (upon which certificate the
Trustee shall be entitled to rely on absolutely without incurring any liability to any person for so
doing (even though such certificate may later be found to have been invalidly given)). None of the
Issuer, the Trustee, the Swap Counterparty, the Noteholder Facilitator, the Calculation Agent, the
Disposal Agent, the Custodian, the Issuing and Paying Agent, the Registrar, the Transfer Agent, the
Dealer, the Arranger or any other person connected to the Notes shall be liable to any Noteholder or
any other person in connection with any Replacement Event and/or any entry into of a Replacement
Swap Agreement or in respect of any amendments to the Master Conditions or these Issue Terms
and any other documentation relating to the Notes which the Noteholder Facilitator has certified in
writing to the Trustee are consequential and necessary in connection with the entry into of such
Replacement Swap Agreement and shall have no responsibility to any Noteholder or any other
person in respect of any of the consequences resulting from a Replacement Event and/or any entry
into of a Replacement Swap Agreement.
6.
Agent Replacement Option
Concurrently with the appointment of any Replacement Swap Counterparty and entry into of a
Replacement Swap Agreement pursuant to paragraph 5 of this Schedule 2 to these Issue Terms
above, but only where the Swap Agreement with the Existing Swap Counterparty has been
terminated in full, the Issuer undertakes, upon receipt of written directions from the Noteholder
Facilitator requesting the Issuer to replace the existing Calculation Agent and/or Disposal Agent (a
“Replacement Agent Notice”), to use reasonable efforts to appoint a replacement calculation agent
(the “Replacement Calculation Agent”) and replacement disposal agent (the “Replacement
Disposal Agent”, and together with the Replacement Calculation Agent, the “Replacement Agents”)
designated by the Noteholder Facilitator, provided that (i) in the case of a Replacement Calculation
Agent, is a reputable financial institution with a place of business in London which provides
calculation agency services as part of its ongoing business activities and (ii) in the case of a
Replacement Disposal Agent, is a reputable financial institution with a place of business in London
which customarily sells securities in the market as part of its ongoing business activities, and in each
case, are satisfactory to the Issuer, the Trustee and the Replacement Swap Counterparty. Upon
receipt of such Replacement Agent Notice, the Issuer shall make reasonable efforts to effect such
replacement on, or as soon as practicable following, the entry into of the Replacement Swap
Agreement. The costs of appointment of the Replacement Agents shall be borne by the Replacement
Swap Counterparty.
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Following the appointment of any Replacement Agent, all references to the Calculation Agent and/or
Disposal Agent, as applicable, shall be deemed to be references to the Replacement Agent for the
purposes of these Issue Terms and any other documentation relating to the Notes. Accordingly, the
Calculation Agent and/or Disposal Agent may be replaced more than once.
For the avoidance of doubt, and notwithstanding Master Condition 11 (Agents) or any other
provisions of the Issue Deed, Principal Trust Deed or any other document relating to the Notes, the
consent of the Noteholders will not be sought or be required in connection with the appointment of
any Replacement Agents in accordance with the foregoing nor for any amendments to the Master
Conditions or these Issue Terms and any other documentation relating to the Notes that the
Noteholder Facilitator certifies in writing to the Trustee are consequential to and necessary in
connection with the appointment of such Replacement Agents upon which certificate the Trustee
shall be entitled to rely absolutely without incurring any liability to any person for so doing (even
though such certificate may later be found to have been invalidly given). None of the Issuer, the
Trustee, the Swap Counterparty, the Noteholder Facilitator, the Calculation Agent, the Disposal
Agent, the Custodian, the Issuing and Paying Agent, the Registrar, the Transfer Agent, the Dealer,
the Arranger or any other person connected to the Notes shall be liable to any Noteholder or any
other person in connection with the appointment of any Replacement Agent or in connection with
any amendment which may be made to the Master Conditions insofar as the proposed amendments
relate to this Series only or these Issuer Terms and any other documentation relating to the Notes
which the Noteholder Facilitator has certified in writing to the Trustee are consequential to and
necessary in connection with the entry into of the Replacement Swap Agreement in accordance with
the foregoing and shall have no responsibility to any Noteholder or any other person in respect of
any of the consequences resulting from any such appointment of a Replacement Agent.
7.
Amendment of Master Condition 1 (Definitions and interpretation), non-application of Master
Conditions 8(c) (Redemption upon Original Collateral Default) and 8(e) (Redemption for
Original Collateral Call) and amendment of Master Conditions 15(a) (Application of Available
Proceeds of Liquidation) and 15(b) (Application of Available Proceeds of Enforcement of Security)
(I)
The definition of “Liquidation” in Master Condition 1 (Definitions and interpretation) shall
be deleted in its entirety and replaced with the following:
““Liquidation” means, in respect of any Collateral, the realisation of such Collateral for
cash proceeds whether by way of sale, early redemption, early repayment or agreed
termination or by such other means as the Disposal Agent determines appropriate, or in the
case of a Bankruptcy Event affecting the Issuer, realisation by such means as determined by
any competent bankruptcy officer. “Liquidate”, “Liquidated” and “Liquidating” shall be
construed accordingly.”
(II)
The provisions of Master Condition 8(c) (Redemption upon Original Collateral Default) and
Master Condition 8(e) (Redemption for Original Collateral Call) shall not apply to the Notes
and references to such Master Conditions throughout the remaining Conditions shall be
ignored.
(III)
The provisions of Master Condition 15(a) (Application of Available Proceeds of Liquidation)
shall, for the purpose of the Notes, be replaced with the following:
“Application of Available Proceeds of Liquidation: The Issuer shall, on each Issuer
Application Date, apply the Available Proceeds as they stand on each such date as follows:
(i)
first, where immediately prior to the associated termination of the Swap Agreement,
the Swap Counterparty’s Credit Support Balance (if any, in its capacity as
Transferor under the Credit Support Annex) was greater than zero, an amount (as
determined by the party responsible for determining such amounts under the Swap
Agreement and such amount being a “CSB Return Amount”)) equal to the lesser
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of (A) the Available Proceeds, (B) the value of the Swap Counterparty’s Credit
Support Balance that was used in determining the Early Termination Amount
payable under the Swap Agreement and (C) the value of the amounts owing to the
Swap Counterparty under the Swap Agreement, if any, which shall be deemed to be
zero if no such amounts are owing (the excess of the value defined in (C) above the
value defined in (B), if any, the “Remaining Swap Counterparty Claim Amount”)
shall be paid to the Swap Counterparty:
(ii)
secondly, in payment or satisfaction of any taxes owing by the Issuer;
(iii)
thirdly, in payment or satisfaction of any fees, costs, charges, expenses and
liabilities of the Trustee under the Trust Deed (including any taxes required to be
paid, legal fees and the Trustee’s remuneration);
(iv)
fourthly, pari passu, in payment of (I) any amounts owing to the Custodian for
reimbursement in respect of payments properly made by it in accordance with the
terms of the Agency Agreement relating to sums receivable on or in respect of the
relevant Mortgaged Property, (II) any amounts owing to the Issuing and Paying
Agent for reimbursement in respect of payments properly made by it in accordance
with the terms of the Agency Agreement to any person in discharge of a Secured
Payment Obligation and (III) any fees, costs, charges, expenses and liabilities then
due and payable to the Agents under the Agency Agreement;
(v)
fifthly, in payment or satisfaction of any Disposal Agent Fees;
(vi)
sixthly, pari passu in payment of any amounts owing to the Swap Counterparty
under the Swap Agreement (which, to the extent that a CSB Return Amount has
been paid to the Swap Counterparty, shall be limited to the Remaining Swap
Counterparty Claim Amount), provided that where:
(1)
the Swap Agreement has not been subject to a designation or occurrence of
an Early Termination Date; and
(2)
in addition to amounts owing to the Swap Counterparty under the Swap
Agreement there are also amounts that are owed by the Swap Counterparty
under the Swap Agreement and which remain unpaid or there are
obligations that were required to be settled by delivery from the Swap
Counterparty to the Issuer and which have not been so settled,
there shall be no payment to the Swap Counterparty under this limb and no payment
to any person ranking junior to the Swap Counterparty under this Master Condition
15(a) until such time as an Early Termination Date has been designated or occurred
and the Termination Payment determined;
(vii)
seventhly, in payment or satisfaction of Corporate Services Provider Fees;
(viii)
eighthly, pari passu in payment of (I) any Early Redemption Amount then due and
payable, (II) any Final Redemption Amount then due and payable and/or (III) any
interest or Instalment Amount that became due and payable on the Maturity Date
and that remains due and payable, as applicable, and, in each case, any interest
accrued thereon (which, for the avoidance of doubt, shall include Default Interest) to
the holders of Notes; and
(ix)
ninthly, in payment rateably of the Residual Amount to the holders of Notes,
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save that no such application shall be made at any time following an Enforcement Notice
having been effectively delivered by the Trustee following the occurrence of an
Enforcement Event.
Notwithstanding the above, if, upon a Counterparty Bankruptcy Event, the Swap
Counterparty or its agents or representatives has indicated that it disagrees with any
calculations or determinations made in respect of the Swap Agreement or the Issuer has
reasonable grounds for anticipating that there will be such a disagreement (and, for this
purpose, the mere fact that a Counterparty Bankruptcy Event has occurred or that the Swap
Counterparty is subject to an insolvency or analogous event shall not, of itself, constitute
reasonable grounds), the Issuer may prior to any payment made under this Master Condition
15(a): (i) require to be indemnified and/or secured and/or pre-funded to its satisfaction in
respect of any payment that might be required to be made to the Swap Counterparty should
the relevant determination or determinations be found or agreed to be incorrect, and/or (ii)
make such retention as seems reasonable to it in order to provide for any payments that
might be required to be made by or on behalf of the Issuer should the relevant calculations
or determinations be found or agreed to be incorrect.
Any Secured Creditor that has a claim in respect of more than one Secured Payment
Obligation may rank differently in respect of each Secured Payment Obligation.
If, following the Initial Issuer Application Date, the Issuer receives any sum from the
Mortgaged Property, the Issuer shall send a notice to the Trustee, the Issuing and Paying
Agent, the Disposal Agent (where there is one) and the Swap Counterparty of the same as
soon as is reasonably practicable upon receiving any such sum.”
(IV)
The provisions of Master Condition 15(b) (Application of Available Proceeds of
Enforcement of Security) shall, for the purpose of the Notes, be replaced with the following:
“Application of Available Proceeds of Enforcement of Security: Subject to and in
accordance with the terms of the Security Documents, with effect from the date on which
any valid Enforcement Notice is effectively delivered by the Trustee following the
occurrence of an Enforcement Event, the Trustee will hold the Available Proceeds received
by it under the Trust Deed on trust to apply them as they stand on each Trustee Application
Date as follows:
(i)
first, where immediately prior to the associated termination of the Swap Agreement,
the Swap Counterparty’s Credit Support Balance (if any, in its capacity as
Transferor under the Credit Support Annex) was greater than zero, an amount (as
determined by the Swap Counterparty or the party responsible for determining such
amounts under the Swap Agreement and such amount being a “CSB Return
Amount”) equal to the lesser of (A) the Available Proceeds, (B) the value of the
Swap Counterparty’s Credit Support Balance that was used in determining the Early
Termination Amount payable under the Swap Agreement and (C) the value of the
amounts owing to the Swap Counterparty under the Swap Agreement, if any, which
shall be deemed to be zero if no such amounts are owing (the excess of the value
defined in (C) above the value defined in (B), if any, the “Remaining Swap
Counterparty Claim Amount”) shall be paid to the Swap Counterparty:
(ii)
secondly, in payment or satisfaction of any taxes owing by the Issuer;
(iii)
thirdly, in payment or satisfaction of any fees, costs, charges, expenses and
liabilities of the Trustee or any receiver in preparing and executing the trusts under
the Trust Deed (including any taxes required to be paid, legal fees, the cost of
realising any Security and the Trustee’s remuneration);
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(iv)
fourthly, pari passu, in payment of (I) any amounts owing to the Custodian for
reimbursement in respect of payments properly made by it in accordance with the
terms of the Agency Agreement relating to sums receivable on or in respect of the
relevant Collateral, (II) any amounts owing to the Issuing and Paying Agent for
reimbursement in respect of payments properly made by it in accordance with the
terms of the Agency Agreement to any person in discharge of a Secured Payment
Obligation and (III) any fees, costs, charges, expenses and liabilities then due and
payable to the Agents under the Agency Agreement;
(v)
fifthly, in payment or satisfaction of any Disposal Agent Fees;
(vi)
sixthly, pari passu in payment of any amounts owing to the Swap Counterparty
under the Swap Agreement (which, to the extent that a CSB Return Amount has
been paid to the Swap Counterparty, shall be limited to the Remaining Swap
Counterparty Claim Amount), provided that where:
(1)
the Swap Agreement has not been subject to a designation or occurrence of
an Early Termination Date; and
(2)
in addition to amounts owing to the Swap Counterparty under the Swap
Agreement there are also amounts that are owed by the Swap Counterparty
under the Swap Agreement and which remain unpaid or there are
obligations that were required to be settled by delivery from the Swap
Counterparty to the Issuer and which have not been so settled,
there shall be no payment to the Swap Counterparty under this limb and no payment
to any person ranking junior to the Swap Counterparty under this Master Condition
15(b) until such time as an Early Termination Date has been designated or occurred
and the Termination Payment determined;
(vii)
seventhly, in payment or satisfaction of Corporate Services Provider Fees;
(viii)
eighthly, pari passu in payment of (I) any Early Redemption Amount then due and
payable, (II) any Final Redemption Amount then due and payable and/or (III) any
interest or Instalment Amount that became due and payable on the Maturity Date
and that remains due and payable, as applicable, and, in each case, any interest
accrued thereon (which, for the avoidance of doubt, shall include Default Interest) to
the holders of Notes; and
(ix)
ninthly, in payment rateably of the Residual Amount to the holders of Notes.
Any Secured Creditor that has a claim in respect of more than one Secured Payment
Obligation may rank differently in respect of each Secured Payment Obligation.
If the amount of moneys available to the Trustee for payment in respect of the Notes under
this Master Condition 15(b) at any time following delivery by the Trustee of an Enforcement
Notice in accordance with the Conditions, other than where the Mortgaged Property has
been exhausted, amount to less than 10 per cent. of the nominal amount of the Notes then
outstanding, the Trustee shall not be obliged to make any payments under this Master
Condition 15(b) and may, at its discretion, invest such moneys. The Trustee may retain such
investments and accumulate the resulting income until the investments and the
accumulations, together with any other funds for the time being under the Trustee’s control
and available for such payment, amount to at least 10 per cent. of the nominal amount of the
Notes then outstanding and then such investments, accumulations and funds (after deduction
of, or provision for, any applicable taxes) shall be applied as specified in this Master
Condition 15(b).”
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8.
Amendment to Master Condition 14(a) (Trustee to Enforce Security)
Master Condition 14(a) (Trustee to Enforce Security) shall be deleted in its entirety and replaced
with the following:
“(a)
9.
Trustee to Enforce Security: At any time after the Trustee becomes aware of the
occurrence of an Enforcement Event with respect to a Class of Notes, it may, and if
requested by holders of at least one-fifth in nominal amount of such Class of Notes then
outstanding, directed by an Extraordinary Resolution given by the holders of such Class of
Notes, or directed in writing by the Swap Counterparty, it shall (provided in each case that
the Trustee shall have been indemnified and/or secured and/or pre-funded to its satisfaction
by the holders of such Class of Notes and provided that the Trustee has effectively delivered
a valid Enforcement Notice to the Issuer, the Custodian and the Disposal Agent) enforce the
Security constituted by the Trust Deed and/or any other Security Documents (if applicable).”
Amendment to Master Condition 19(a) (Meetings of Noteholders)
The following provisions shall be inserted at the end of Master Condition 19(a) (Meetings of
Noteholders):
“Without limiting the foregoing, the Trust Deed contains provisions for convening meetings of
Noteholders of a Class only to give authority, direction or sanction by Extraordinary Resolution
which is required to be given in relation to an Event of Default or the enforcement of the Security, as
set out in Master Conditions 8(j)(i), 8(j)(ii) and 14, that solely affects such Class of Notes.
For the purposes of this Master Condition:
10.
(i)
references to a meeting are to a meeting of Noteholders of a single series of Notes or a Class
of Notes, as applicable, and include, unless the context otherwise requires, any adjournment;
and
(ii)
references to “Notes” and “Noteholders” are only to the Notes of the Series or to the Notes
of a Class, as applicable, in respect of which a meeting has been, or is to be, called, and to
the holders of these Notes, respectively. With respect to a meeting called in relation to the
Notes or Noteholders of a Class, any reference to Notes or Noteholders of a Series in this
Schedule shall be deemed to be a reference to the Notes or Noteholders of such Class.”
Programme Update
The following provision shall be inserted at the end of Master Condition 19(a) (Modification of the
Conditions and/or any Transaction Document):
“Notwithstanding the foregoing, if any of the programme agreements entered into by the Issuer in
connection with the Programme are amended and/or restated prior to the Issue Date of this Series,
the Issuer and the Swap Counterparty shall be entitled to amend any of the Conditions or any of the
provisions of the Transaction Documents in connection with this Series (including the Agency
Agreement and the Swap Agreement) to reflect such changes, in each case, without the consent of
the Noteholders.”
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SCHEDULE 3 TO THE ISSUE TERMS – PROVISIONS RELATING TO EUROCLEAR SWEDEN
1.
General
For so long as the Notes are represented by a Global Certificate and are shown in the records of
Euroclear as being held by the Swedish CSD as defined below, the provisions of paragraph 2 of this
Schedule will apply.
1.1
Form of Swedish Notes
The Global Certificate issued in respect of the Notes will be deposited upon issuance with and
registered in the name of a nominee for Euroclear. The Notes will be shown in the records of
Euroclear as being held by a Swedish central securities depositary (the “Swedish CSD”) which will
be Euroclear Sweden AB (“Euroclear Sweden”) or any successor acceptable to or substitute
appointed by the Issuer. The Swedish CSD will hold all interests in the Notes for the sole purpose of
enabling clearing and settlement of interests therein in uncertificated and dematerialised book-entry
form in the records maintained by the Swedish CSD in accordance with the CSD Rules (as defined
below) for the benefit of the ultimate beneficial owners.
Beneficial interests in the Swedish CSD’s interest in the Notes will be shown in the records of the
Swedish CSD pursuant to an affiliation agreement dated prior to the Issue Date entered into between
the Issuer and the Swedish CSD. No owner of such a beneficial interest is entitled to transfer (and
the Swedish CSD will not allow any such transfer) such interest directly to the records of Euroclear
and thereby removing the relevant Notes from the records of the Swedish CSD.
The holders of the Notes expressly accept and acknowledge that the Swedish CSD will only
distribute payments for the Notes that the Swedish CSD has received from Euroclear in respect of
the Notes.
1.2
Euroclear Sweden
Euroclear Sweden is a subsidiary within the Euroclear group of companies. Euroclear Sweden is a
limited liability company. It is authorised and regulated by the Swedish Financial Supervisory
Authority as a central securities depository within the meaning of the Swedish Financial Instruments
Accounts Act (1998:1479 (as amended)) and as a clearing organisation within the meaning of the
Swedish Securities Markets Act (2007:528 (as amended)). All transactions relating to the beneficial
interests in the Swedish CSD’s interest in the Notes (such as issuance, sale and transfer, pledge
arrangements and other dispositions and redemptions) are executed as computerised book-entry
registrations. Consequently, in order to effect such entries beneficial owners must establish a bookentry account through a credit institution or a securities firm acting as an account operator with the
Swedish CSD (currently Euroclear Sweden). More information regarding Euroclear Sweden and its
rules and operating procedures can be found at its internet web site at www.euroclear.com.
1.3
Swedish Agent
In addition, the Issuer has appointed or will appoint Skandinaviska Enskilda Banken AB (publ) as
“Swedish Agent” in relation to the Notes pursuant to an issuing and paying agency agreement dated
16 April 2014 (the “Swedish Agency Agreement”).
2.
Amendments to the Master Conditions
The following provisions shall supplement and amend the Master Conditions and the provisions of
the Global Certificate:
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2.1
Beneficial interests and transfer
The beneficial interests in the Swedish CSD’s interest in the Notes will be held in Swedish
uncertificated and dematerialised book-entry form in accordance with the Swedish Financial
Instruments Accounts Act (Sw. lag (1998:1479) om kontoföring av finansiella instrument) and all
such other Swedish laws, regulations and operating procedures applicable to and/or issued by the
Swedish CSD (the “CSD Rules”). No owner of such a beneficial interest is entitled to transfer (and
the Swedish CSD will not allow any such transfer) such interest directly to the records of Euroclear
and thereby removing the relevant Notes from the records of the Swedish CSD.
Such beneficial interests will be transferable only in accordance with the CSD Rules. Title to such
beneficial interests shall pass in the records maintained by the Swedish CSD in accordance with the
CSD Rules.
The Issuer shall be entitled to obtain information from the register of the Swedish CSD in
accordance with the CSD Rules.
2.2
Amendments while in global form
For the purpose of ascertaining the validity of a beneficial holding by a person on whose behalf the
Swedish CSD is holding an interest in the Notes, the records of the Swedish CSD (in which regard,
any electronic record, record statement, certificate or other information issued by the Swedish CSD
as to the beneficial holding or the holding of any person duly authorised to act as a nominee (Sw.
förvaltare)) shall be conclusive and final for all purposes and shall constitute commercially
reasonable evidence, save in the case of manifest error.
2.3
Payments
Each holder of beneficial interests in the Swedish CSD’s interest in the Notes must look solely to the
Swedish CSD for its share of the payments so made by the Issuer. The Swedish CSD does not
assume the obligations of the Issuer and is only obliged to distribute payments it has received in its
capacity of Swedish CSD in respect of the Notes. It is expected that payments in respect of the
Notes will be received by holders of the beneficial interests in the Swedish CSD’s interest in the
Notes holding such interests at an account with the Swedish CSD no later than the seventh business
day (as defined by the then applicable CSD Rules) after the date on which such payment becomes
due and payable in accordance with the terms and conditions of the Notes. Pursuant to the CSD
Rules, payments in respect of any such beneficial interest shall be made to the holders shown as such
on the fifth business day (as defined by the then applicable CSD Rules) before the due date for such
payment, or such other business day falling closer to the due date as then may be stipulated in the
CSD Rules. Such day shall be the “Record Date” in respect of the Notes in accordance with the
CSD Rules. Payments will be subject in all cases to any fiscal or other laws and regulations
applicable thereto in the place of payment and will be made in accordance with the CSD Rules.
2.4
Notices
So long as any Notes are represented by a Global Certificate and such Global Certificate is held on
behalf of a clearing system, notices to the Swedish CSD may be given by the Issuer delivering the
relevant notice to that clearing system for communication to the Swedish CSD (along with a copy of
such notice being delivered by the Issuer to the Swedish Agent pursuant to the Swedish Agency
Agreement) rather than by mail as required by the Conditions (except that if and for so long as the
Notes are listed on a stock exchange, all notices to holders of the Notes will be published in
accordance with the rules of such stock exchange). Notices to each holder of beneficial interests in
the Swedish CSD’s interest in the Notes will be sent in accordance with the CSD Rules but shall be
deemed to have been given to the holders of the Notes on the Reference Business Day immediately
following the day on which the said notice was given to the Swedish CSD.
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2.5
Agents
Master Condition 11(a) (Agents – Appointment of Agents) will be deleted and the following
substituted therefor:
“(a)
Appointment of Agents: The Issuing and Paying Agent, the Registrar, the Transfer Agents,
the Custodian, the Disposal Agent and the Calculation Agent initially appointed by the
Issuer and their respective Specified Offices, along with the Swedish Agent, are listed in the
applicable Issue Terms. Subject to the provisions of (i) the Agency Agreement, the Issuing
and Paying Agent, the Registrar, the Transfer Agents, the Custodian, the Disposal Agent and
the Calculation Agent act solely as agents of the Issuer and do not assume any obligation or
relationship of agency or trust for or with any Noteholder and (ii) the Issuing and Paying
Agency Agreement dated 16 April 2014 (in respect of the Swedish Agent), the Swedish
Agent acts solely as agent of the Issuer and does not assume any obligation or relationship of
agency or trust for or with any Noteholder, other than to the extent any such obligations
result from mandatory provisions in the Swedish Financial Instruments Accounts Act. The
Issuer reserves the right at any time with the approval of the Trustee (except that the
approval of the Trustee shall not be required for the appointment of a replacement Disposal
Agent or Calculation Agent where Noteholders direct the Issuer to appoint such replacement
pursuant to this Condition) to vary or terminate the appointment of the Issuing and Paying
Agent, the Registrar, any Transfer Agent, the Custodian, the Disposal Agent, the Calculation
Agent, the Swedish Agent and the Swedish CSD and to appoint additional or other Issuing
and Paying Agent(s), Transfer Agent(s), Custodian(s), Disposal Agent(s), Calculation
Agent(s), Swedish Agent(s), a substitute Swedish CSD or such other agents as may be
required provided that the Issuer shall at all times maintain (i) an Issuing and Paying Agent,
(ii) a Registrar in relation to Registered Notes, (iii) a Transfer Agent in relation to Registered
Notes, (iv) a Disposal Agent, (v) a Calculation Agent, (vi) a Custodian, (vii) a Swedish
Agent in Sweden duly authorised under the CSD Rules, (viii) a Swedish CSD duly
authorised as a central securities depository under the Swedish Financial Instruments
Accounts Act, and (ix) such other agents as may be required by any other stock exchange on
which the Notes may be listed, in each case as approved by the Trustee (subject as provided
above).
Notice of any such change or any change of any Specified Office shall promptly be given by
the Issuer to the Noteholders in accordance with Master Condition 22 (Notices).”.
2.6
Substitution
The following sentence shall be added at the end of Master Condition 19(c) (Meetings of
Noteholders, modification, waiver and substitution – Substitution):
“In respect of any such substitution of the Issuer, the substitution will, in addition to the other criteria
set forth above in this Master Condition 19(c), be subject to the prior written consent of the Swedish
CSD.”.
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DESCRIPTION OF THE COMPANY AND THE COMPARTMENT
Company
Argentum Capital S.A. (the “Company”) is a public limited liability company (société anonyme)
incorporated under Luxembourg law and is established as a société de titrisation within the meaning of the
Securitisation Act 2004 (as may be amended from time to time). The Company has been approved by the
Luxembourg Commission de Surveillance du Secteur Financier (the “CSSF”) as a regulated securitisation
undertaking within the meaning of articles 19 et seq. of the Securitisation Act 2004 and is supervised by the
CSSF.
The registered office of the Company is at 51 Avenue J.-F. Kennedy, L-1855 Luxembourg. The share
capital of the Company is EUR 31,000 divided into 31,000 shares with a par value of EUR 1 (each a
“Company Share”) all of which are fully paid. All the issued Company Shares are held by Stichting
Argentum, a foundation (stichting) incorporated under the laws of The Netherlands (the “Shareholder”).
Compartment and source of funds
In connection with the issue of the Notes, the board of directors of the Company will create a compartment
of the Company (Compartment GAP+ 2047 - 2048 November 2014 (the “Compartment”)) relating solely
to these Notes separate from any other Series of Notes issued by the Company. A compartment is a separate
part of the Company’s assets and liabilities. An investor’s recourse to the Issuer in respect of these Notes is
limited to the assets and liabilities allocated to the Compartment created in respect of these Notes.
The principal assets of the Issuer allocated to the Compartment are the Issuer’s rights against the Swap
Counterparty under the Swap Agreement.
The ability of the Issuer to pay the intended amounts due under the Notes (as described in more detail in the
sections of this Prospectus entitled “Transaction Description” and “Issue Terms”) will be dependent upon
the payment of:
(a)
the payment of all sums due from the Swap Counterparty under the Swap Agreement; and
(b)
the value of any Eligible Cash and/or Eligible Securities delivered to the Issuer under the Credit
Support Annex in certain circumstances.
Where such assets are not sufficient to meet the claims of the investors in relation to the Notes, investors will
have no further recourse to any other assets of the Company. In connection with this, investors should be
aware that where any Notes redeem early the assets allocated to the Compartment relating to the Notes and
any amounts derived from such assets shall first be used to pay certain amounts owing to other parties,
including Credit Suisse International as Swap Counterparty to the extent that any amounts are owing to it.
These amounts may be significant and will reduce the amount available to investors in the Notes, potentially
to zero.
Under the Securitisation Act 2004, the assets of each Compartment for each Series and the proceeds thereof
are, in principle, exclusively available for distribution to the specified Noteholders and the relevant swap
counterparties relating to such Series and Class of Notes. A creditor of the Company may have claims
against the Company in respect of more than one Series, in which case the claims in respect of each
individual Series will be limited to the Mortgaged Property relating to such Series only. Upon a liquidation
of a Compartment, if the Mortgaged Property and the proceeds of enforcement and realisation thereof, as
applicable, are not sufficient to make all payments and deliveries, as applicable, due in respect of the Notes,
then the obligations of the Issuer in respect of the Notes of that Series will be limited to the Mortgaged
Property of the Compartment in respect of that Series, as specified in the Master Conditions and this
Prospectus. The Issuer will not be obliged to make any further payment or delivery, as applicable, for any
Series of Notes in excess thereof. Following application of the relevant Mortgaged Property and the
proceeds of enforcement and realisation thereof, as applicable, in accordance with the Master Conditions, the
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claims of the relevant Noteholders and the relevant swap counterparties of the relevant Series for any
shortfall shall be extinguished and the relevant Noteholders and the relevant swap counterparties (and any
person acting on behalf of any of them) may not take any further action to recover such shortfall and none of
them should be able to petition for the winding-up, the liquidation or the bankruptcy of the Company or any
other similar insolvency related proceedings. Failure to make any payment or delivery, as applicable, in
respect of any such shortfall shall in no circumstances constitute an event of default under the Master
Conditions. Any shortfall shall be borne by the Noteholders and the swap counterparties of the relevant
Series in respect of which the Notes have been issued according to the priorities specified in the Master
Conditions as amended by this Prospectus.
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DESCRIPTION OF THE SWAP AGREEMENT
Overview of the Swap Agreement
The Swap Agreement comprises the swap agreement relating to the Notes and entered into by the Issuer and
the Swap Counterparty by their execution of the Issue Deed relating to the Notes on the terms of the ISDA
2002 form of Master Agreement as amended by the Schedule set out in the Master Swap Terms (dated 23
December 2013) incorporated by reference into (and as modified and/or supplemented by) such Issue Deed
and as supplemented by (a) a confirmation evidencing a credit default swap transaction relating to each Class
of Notes (each, a “Credit Default Swap Transaction”); (b) a confirmation evidencing an equity swap
transaction relating to the Class A Notes (the “Class A Equity Swap Transaction”) and an equity swap
transaction relating to the Class B Notes (the “Class B Equity Swap Transaction”, and together with the
Class A Equity Swap Transaction, the “Equity Swap Transactions” and each an “Equity Swap
Transaction” relating to the relevant Class), each between the Issuer and the Swap Counterparty; and (c) an
ISDA Credit Support Annex (Bilateral Form-Transfer) (English Law) containing the paragraph 11 elections
set out in the Master CSA Terms dated 23 December 2013 which are also incorporated by reference into
(and as modified and/or supplemented by) such Issue Deed (the “Credit Support Annex”) dated as of the
same date (together, the “Swap Agreement”).
The Issuer has assigned by way of security in favour of the Trustee for itself and as trustee for the
Noteholders all of the Issuer’s rights, under the Swap Agreement (without prejudice to, and after giving
effect to, any contractual netting provision contained in the Swap Agreement).
The Master Swap Terms comprised in the Swap Agreement in respect of the Notes include the following
provisions:
(A)
The transactions comprised in the Swap Agreement will be capable of termination at the option of
the Issuer upon the occurrence of any of the following events of default in relation to the Swap
Counterparty: failure to pay or deliver, misrepresentation, bankruptcy and merger without
assumption (as such events are more particularly described in the Master Swap Terms) provided that,
the Issuer may be obliged to first use reasonable efforts to enter into a replacement swap agreement
with a replacement counterparty and if a replacement swap transaction is not entered into, the Swap
Agreement will automatically terminate (as more fully described in the Issue Terms of the Notes).
The transactions comprised in the Swap Agreement will be capable of termination at the option of
the Swap Counterparty upon the occurrence of any of the following events of default in relation to
the Issuer: failure to pay or deliver, bankruptcy and merger without assumption (as such events are
more particularly described in the Master Swap Terms).
(B)
In the event that it becomes unlawful for either the Issuer or the Swap Counterparty to perform its
obligations under a transaction comprised in the Swap Agreement, either the Issuer or the Swap
Counterparty (or both) will have the right to terminate such transaction.
(C)
In the event that a withholding or deduction is imposed on any payment to be made by the Issuer or
the Swap Counterparty to the other under a transaction comprised in the Swap Agreement as a result
of (i) sections 1471 to 1474 of the U.S. Internal Revenue Code of 1986; (ii) any similar or successor
legislation to (i); (iii) any agreement described in section 1471(b) of the U.S. Internal Revenue Code
of 1986; (iv) any regulations or guidance pursuant to any of the foregoing; (v) any official
interpretations of any of the foregoing; (vi) any intergovernmental agreement to facilitate the
implementation of any of the foregoing (an “IGA”); or (vii) any law implementing an IGA, either
the Issuer or the Swap Counterparty (or both) has the right to terminate such transaction.
(D)
Subject to sub-paragraphs (E), (F) and (G) below, in the event that a withholding or deduction for or
on account of any Indemnifiable Tax is imposed on any payment to be made by either the Issuer or
the Swap Counterparty to the other under a transaction comprised in the Swap Agreement, neither
party is obliged to gross up such payment.
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(E)
Subject to sub-paragraph (G) below, in the event that a withholding or deduction is or there is a
substantial likelihood that a withholding or deduction will be imposed on any payment to be made by
either the Issuer or the Swap Counterparty to the other under a transaction comprised in the Swap
Agreement as a result of (i) any action taken by a taxing authority or brought in a court of competent
jurisdiction or (ii) a change in tax law(s), either the Issuer or the Swap Counterparty (or both) have
the right to terminate such transaction.
(F)
Subject to sub-paragraph (G) below, in the event that the Issuer or the Swap Counterparty will
receive a payment from the other party from which an amount has been withheld or deducted on
account of any tax (such receiving party, the “Burdened Party”) under a transaction comprised in
the Swap Agreement solely as a result of a merger event affecting the Burdened Party, the Burdened
Party has the right to terminate such transaction.
(G)
In the event that the Swap Counterparty has the right to terminate a transaction comprised in the
Swap Agreement as a result of the events described in sub-paragraphs (E) or (F) above, the Swap
Counterparty is required to use its reasonable endeavours to arrange for the transfer of all of its rights
and obligations under the relevant transactions comprised in the Swap Agreement to an office or
affiliated company of the Swap Counterparty within 30 days such that the relevant termination event
described in sub-paragraph (E) or (F) above ceases to exist, failing which, the Swap Counterparty
shall give notice to the Issuer and may terminate the transaction.
(H)
If an Early Redemption Trigger Date occurs or the Issuer fails to give an Early Redemption Notice
when required to do so (in each case, other than in circumstance where the Swap Agreement has
already terminated) then the Swap Counterparty has the right to terminate the Swap Agreement.
(I)
The Swap Counterparty has the right to terminate the Swap Agreement if any of the clauses in the
Principal Trust Deed relating to pre-liquidation and enforcement of the Security, post-liquidation and
enforcement of the Security or post-enforcement of the Security are amended, or if the equivalent
provisions of the Conditions are amended (after the Issue Date of the Notes) such that the Issuer’s
obligations to the Swap Counterparty under the Swap Agreement are further contractually
subordinated to the Issuer’s obligations to any other secured creditor.
(J)
The Swap Counterparty has the right to terminate the Swap Agreement if certain amendments or
waivers are made by the Issuer to the relevant Series documents without the Swap Counterparty’s
prior written consent which would result in the Swap Counterparty paying more or receiving less
under the Swap Agreement than would otherwise have been the case immediately prior to such
amendment or waiver.
(K)
The Swap Counterparty has the right to terminate the Swap Agreement if the Issuer breaches any of
the covenants contained in the Principal Trust Deed, unless the Trustee and the Swap Counterparty
have given their prior written consent to such breach of a restrictive covenant in accordance with the
terms of the Principal Trust Deed.
(L)
If the Notes are repurchased and cancelled by the Issuer pursuant to Master Conditions 8(n)
(Purchases) and 8(o) (Cancellation), a proportionate part of each transaction attributable to such
Notes comprised in the Swap Agreement will terminate.
In the event of any inconsistency between the Master Swap Terms and the terms of any confirmation in
respect of a transaction comprised in the Swap Agreement, the terms of such confirmation shall prevail.
Payments to the Noteholders under each Class of Notes are entirely contingent on the full and timely
performance of the obligations of the Swap Counterparty under the Swap Agreement.
In respect of each Class of Notes, if the Credit Default Swap Transaction and the Equity Swap Transaction
relating to such Class comprised in the Swap Agreement are terminated (or the Swap Agreement is
terminated in whole), such Class shall be redeemed by payment of the Early Cash Redemption Amount,
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subject as provided in paragraph 20 of Part A of the Issue Terms and paragraph 2 of Schedule 2 of the Issue
Terms of the Notes.
Early Cash Redemption Amount
Where the Notes of a Class are to be redeemed early, each Noteholder shall be entitled to an amount per
Note referred to as its “Early Cash Redemption Amount”. The quantum of such amount will depend on the
value of the Equity Swap Transaction and Credit Default Swap Transaction relating to such Class, in each
case from the perspective of the Issuer and as determined in accordance with the relevant Swap Agreement
(note that there may be two relevant Swap Agreements if a Replacement Event has previously occurred, for
example, as a result of an Equity Swap Termination Event – see the section of this Prospectus entitled
“Transaction Description” for further description of Replacement Events). In addition, if all swap
transactions under a Swap Agreement are terminating on the same date, then an account shall also be taken
of the SEK equivalent value of the proceeds of the Collateral (that has derived from the cash and assets
transferred by the Swap Counterparty to the Issuer under the Credit Support Annex relating to such Swap
Agreement) that have been realised and are available for distribution to Noteholders (after satisfying any
costs and expenses that are due to be satisfied in accordance with the terms and conditions of the Notes prior
to Noteholders being paid).
Partial Termination of Swap Agreement in connection with the Early Redemption of a Class
Where a Class of Notes is redeemed in circumstances where swap transactions in respect of other Classes
will remain outstanding (which is possible, for example, if an Equity Swap Transaction relating to a Class is
terminated early as a result of certain disruption or adjustment events described in the section of this
Prospectus entitled “Description of the Equity Swaps”), then the Early Cash Redemption Amount for such
Class of Notes shall be informed by the amount payable by the Swap Counterparty to the Issuer as a result of
the termination of the Equity Swap Transaction and Credit Default Swap Transaction relating to such Class.
This is referred to in the terms and conditions of the Notes as the “Termination Payment”, which reflects an
amount determined in accordance with the Swap Agreement that is called the “Early Termination Amount”.
The Early Termination Amount consists of aggregating three components that are detailed within the terms
of the Swap Agreement:
(A)
the value (expressed in SEK), considered from the Issuer’s perspective, of each of the Equity Swap
Transaction and/or Credit Default Swap Transaction relating to such Class under the Swap
Agreement (referred to in the Swap Agreement as the Close-out Amount(s) for each swap
transaction being terminated, as described below); plus
(B)
the value (expressed in SEK) of any Unpaid Amounts (as described below) owing to the Issuer; less
(C)
the value (expressed in SEK) of any Unpaid Amounts (as described below) owing to the Swap
Counterparty.
Unpaid Amounts
Unpaid Amounts are, broadly, (a) payments or (b) valuations in respect of deliveries, that were scheduled to
have been made to a party on or before the date that the relevant Swap Transactions were terminated but
which were not made, in each case together with interest from (and including) the date the relevant
obligation was scheduled to be performed to (but excluding) the relevant early termination date. These
payments or deliveries may not have been made, for example, because of a default by the payer, the deferral
of payment as a result of the payee being in default or the payment obligation having terminated by reason of
designation of the early termination date.
Close-out Amount
The Close-out Amount for the Equity Swap Transaction and Credit Default Swap Transaction is, broadly, a
measure of determining the value to the Issuer of such swap transactions by determining the cost that it
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would incur in replacing, or providing the economic equivalent of, the material terms of such swap
transactions. In calculating the Close-out Amounts, Unpaid Amounts (as described above) and legal fees and
out-of-pocket expenses are excluded.
In determining a Close-out Amount, the determining party (which is likely to be the Swap Counterparty
other than where it has defaulted) may consider any relevant information, including, without limitation, one
or more of the following types of information: (a) quotations for replacement transactions supplied by one or
more third parties; (b) relevant market data in the relevant market supplied by one or more third parties (of
the type described below), including, without limitation, relevant rates, prices, yields, yield curves,
volatilities, spreads, correlations or other relevant market data in the relevant market; or (c) information of
the types described in clause (a) or (b) above from internal sources (including any of the determining party’s
affiliates) if that information is of the same type used by the determining party in the regular course of its
business for the valuation of similar transactions. In addition, there may be situations in which it is
commercially reasonable for the determining party to consider any loss or cost incurred in connection with
its terminating, liquidating or re-establishing any hedge related to the terminated transactions (or any gain
resulting from any of them), provided that there is no double-counting of such amounts in the determining
party’s calculation.
Commercially reasonable procedures used in determining a Close-out Amount may include the following:
(a) application by the Swap Counterparty of pricing or other valuation models to relevant market data from
third parties or information from internal sources, provided that, at the time of the determination of the
Close-out Amount, these models are used by it in the regular course of its business in pricing or valuing
transactions between the determining party and unrelated third parties that are similar transactions; and (b)
application of different valuation methods to terminated transactions depending on the type, complexity, size
or number of the Terminated Transactions.
Termination of Swap Agreement in full in connection with the Early Redemption of a Class
Where a Class of Notes is redeemed in circumstances where all swap transactions under the relevant Swap
Agreement are terminated at the same time, then the Early Cash Redemption Amount for such Class of
Notes shall be informed not only by the Close-out Amounts and Unpaid Amounts relating to the terminating
swap transactions (as described above), but also by the SEK equivalent value of any cash and assets
transferred by the Swap Counterparty and then held by the Issuer under the Credit Support Annex relating to
such Swap Agreement.
Liquidation of Collateral under the Credit Support Annex
In such circumstances, the Collateral shall be liquidated by the Disposal Agent on behalf of the Issuer
pursuant to the terms of the Agency Agreement in order to realise cash proceeds for the non-cash assets
comprised therein, and then the remaining cash converted into SEK (the “CSB Collateral Value”). Such
CSB Collateral Value, after satisfaction of certain costs and expenses that may be due, shall be treated as an
Unpaid Amount due from the Issuer to the Swap Counterparty for the purposes of determining the Early
Termination Amount in lieu of the Issuer having to redeliver equivalent assets or pay equivalent cash
amounts in the relevant currencies to the Issuer. Whilst this treatment as an Unpaid Amount will reduce the
Early Termination Amount that would otherwise be determined to be payable from the Swap Counterparty
or possibly reverse the payment (so that the Issuer owes the Swap Counterparty such excess), the Early Cash
Redemption Amount includes the CSB Collateral Value within the amount that is ultimately payable by the
Issuer to Noteholders.
The aggregate Early Cash Redemption Amount payable to the Noteholders of the relevant redeeming Class
in such circumstances is therefore expected to be (i) the proportion of the CSB Collateral Value relating to
the value of the swap transactions in respect of such Class, plus (ii) the Early Termination Amount if payable
to the Issuer (which will be the case where the combined Close-out Amounts and Unpaid Amounts in respect
of the relevant terminating transactions exceeds the CSB Collateral Value) or (iii) minus the Early
Termination Amount (which will be the case where the combined Close-out Amounts and Unpaid Amounts
in respect of the relevant terminating transactions are less than the CSB Collateral Value).
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DESCRIPTION OF THE CREDIT DEFAULT SWAPS AND THE CREDIT EVENT PROVISIONS
RELATING TO THE CREDIT DEFAULT SWAP TRANSACTIONS AND THE NOTES
Credit derivatives and credit default swaps
A credit derivative transaction is a transaction which is entered into between two parties generally to transfer
to one of the parties the credit risk of a third party. One of the parties to the transaction will be a purchaser of
credit protection (and hence a seller of credit risk), whilst the other will be a seller of credit protection (and
therefore a purchaser of credit risk). Each Class of Notes represents a funded credit derivative transaction in
the form of a debt security whilst the Credit Default Swap Transaction relating to such Class includes a
credit derivative component. Under the terms of each Class of Notes, the Issuer will be the buyer of credit
protection and the Noteholders of such Class will be the sellers of credit protection. Under each Credit
Default Swap Transaction, the Issuer will be the seller of credit protection and the Swap Counterparty will be
the buyer of credit protection.
A description of the Credit Default Swap Transactions, including the amounts receivable by the Issuer
thereunder and the related definitions, is set out in the section of this Prospectus entitled “Transaction
Description” under the heading “Impact of the Credit Default Swap Transactions on the Notes”.
Credit default swaps are transactions in which settlement is triggered by one of a specified number of events,
which may include default, insolvency or distressed restructuring, of a particular Reference Entity or
Reference Entities referenced in the terms of such transaction. Credit default swaps are contracts rather than
securities and are traded between two parties “over-the-counter”. A protection buyer will typically make one
or more fixed rate payments to the protection seller. In exchange, the protection seller typically agrees to
make payment to the protection buyer following the occurrence of the relevant event in relation to the
Reference Entity, subject to satisfaction of certain conditions. Alternatively, the protection seller may agree
in such case to purchase at par bonds or loans of the relevant Reference Entity (which are likely to be trading
in the market at a discount to par following the occurrence of the relevant event in relation to the Reference
Entity). Credit default swaps are the most commonly-traded form of credit derivative transaction and many
banks and financial institutions regularly quote prices for entering into credit default swaps. Credit default
swaps may be entered into in relation to the credit risk of a single Reference Entity or a basket of Reference
Entities. The Credit Default Swap Transactions entered into between the Issuer and the Swap Counterparty
are in relation to the credit risk of four Reference Entities, all of which are financial institutions in Europe,
the United States of America or Asia on the Issue Date.
Documentation and terms of a credit default swap
Credit default swaps are typically entered into on the basis of standard definitions and provisions published
by ISDA. ISDA is a trade association whose membership comprises participants in the over-the-counter
derivatives markets. As at the date of this Prospectus, these definitions and provisions are primarily
contained in the 2014 ISDA Credit Derivatives Definitions published by ISDA are referred to below as the
“Credit Derivatives Definitions”. The full text of the Credit Derivatives Definitions is available on ISDA’s
website http://www2.isda.org/ on a subscription basis. The Credit Derivatives Definitions are incorporated
into the confirmation in respect of the Credit Default Swap Transactions (the “Confirmation”) and cross
referred to in the Issue Terms of the Notes.
Certain terms of credit default swaps are subject to negotiation between the parties, for example the maturity
of each transaction and the price of credit protection purchased. However, many key terms of credit default
swaps - for example, the applicable Credit Events - are typically determined by reference to a matrix of
market standard terms published by ISDA (referred to below as the “Settlement Matrix“). The Settlement
Matrix recognises a variety of standard terms based on the nature of the relevant Reference Entity (corporate,
sovereign, etc.) and its location (Europe, North America, Latin America, etc.). The Settlement Matrix is
updated by ISDA from time to time. The standard terms in the Settlement Matrix applicable to the Reference
Entities in the Credit Default Swap Transactions are “European Corporate”, “European Financial Corporate”,
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“North American Corporate”, “Asia Corporate” or “Asia Financial Corporate”, as applicable. The terms of
the Confirmation are based on these key terms. As at the date of this Prospectus, the Settlement Matrix is
available free of charge on ISDA’s website at http://www2.isda.org/.
Credit derivatives determinations committees (“CDDCs”) have the power to make binding
determinations
The CDDCs were established in March 2009 to make determinations that are relevant to the majority of the
credit derivatives market and to promote transparency and consistency. Prospective Noteholders should note
that a CDDC may have the power to make binding decisions that may apply to the Notes on critical issues
such as whether a Credit Event has occurred and whether one or more Auctions should take place.
Noteholders will be bound by any such relevant decisions that the Calculation Agent determines are
applicable to the Notes and the timing and/or occurrence of any payments on the Notes may be affected by
any such relevant decisions or subsequent determinations.
The CDDCs are regional and as at the date of this Prospectus there is a CDDC for each of the following five
regions: the Americas, Asia (excluding Japan), Australia and New Zealand, Europe, the Middle East and
Africa and Japan. The CDDC which is relevant for the Notes will be Europe, the Americas or Asia
(excluding Japan), as applicable (i.e. the one constituted for the region applicable to the relevant Reference
Entity to which a given determination relates).
The proceedings of each CDDC will be governed by rules published from time to time by ISDA (the
“Rules“). A copy of the Rules published by ISDA as of 7 April 2014(as updated from time to time) is
available free of charge at http://www2.isda.org/. A CDDC will be convened upon referral of a question to
ISDA by an eligible market participant, subject to the agreement of a specified number of the voting
members of the relevant CDDC. ISDA will convene the CDDC for the region to which the referred question
relates, as determined in accordance with the Rules. Noteholders will not have any rights to submit questions
for resolution by a CDDC solely by virtue of being an investor in the Notes, and none of the Issuer, the
Trustee, the Swap Counterparty, any Agent nor any entity connected with any of them will have an
obligation to submit a question on behalf of any Noteholders.
In resolving that a Credit Event has occurred, a CDDC must act by a super-majority of 80 per cent. of voting
members. Certain other determinations, for example, as to the initial list of eligible obligations for purposes
of an Auction (see below) may be made by a majority of more than 50 per cent. of voting members. Where
either a CDDC is required to resolve a particular matter by way of a super-majority, but having voted on
such matter is unable to do so, or where a CDDC so resolves by a majority, questions may be submitted to an
external review process which will be convened to review the question and potentially overturn the decision
of the CDDC. In order for the external review panel to overturn the decision of a CDDC, (i) two out of three
of the members of the panel must vote in the affirmative if the original vote of the CDDC did not exceed 60
per cent., or (ii) all three members of the panel must vote in the affirmative if the original vote of the CDDC
was between 61 per cent. and 79 per cent. The external review panel will be chosen from a pool that is made
of industry experts nominated by ISDA members. The members of each external review panel will be chosen
with the unanimous approval of the applicable CDDC or by ISDA.
A CDDC may decline to resolve a particular question. Questions referred to the CDDC and the results of
binding votes will be published on http://www2.isda.org/. None of the Issuer, the Trustee, the Swap
Counterparty, any Agent nor any entity connected with any of them will be obliged to inform the
Noteholders that a CDDC has been or is likely to be convened.
CDDC membership
Each CDDC is composed of fifteen voting members and three non-voting consultative members. Ten of the
voting members are dealer institutions, with eight serving across all regions and two potentially varying by
region. The other five voting members are non-dealer institutions that serve across all regions. The three
non-voting consultative members consist of one dealer institution and one non-dealer institution that serve
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across all regions and one dealer institution that could potentially vary by region. Noteholders will have no
role in the composition of the CDDC.
As at the date of this Prospectus, the Swap Counterparty and certain of its affiliates are members of one or
more CDDCs. In reaching decisions, neither the Swap Counterparty nor any other member of the CDDC will
take account of the interests of the Noteholders and for such purpose the Swap Counterparty may ignore any
conflict of interest arising from the Swap Counterparty’s rights and obligations under, or in respect of, the
Swap Agreement relating to the Notes. Noteholders will not have any recourse against ISDA or the members
of any CDDC in relation to resolutions passed or not passed by any such CDDC.
Changes to the terms of market standard credit default swaps
From time to time the terms of market standard credit default swap transactions may be subject to
modification. Where such modifications are intended to affect existing transactions (in addition to
transactions entered into after the date on which the relevant modification is announced), such modifications
have previously been implemented by way of a protocol published by ISDA. Market participants may elect
to adhere to such a protocol in order to confirm that they wish transactions to which they are a party to be
subject to such modification.
If the Issuer and the Swap Counterparty wished to amend the Credit Event provisions relating to the Credit
Default Swap Transactions and the Notes, the Issuer is likely to seek consent from the Noteholders.
Calculation Agent Determinations and Discretions
Noteholders should note that the Calculation Agent (under both the Notes and the Swap Agreement) is
responsible for making certain determinations and has the right to exercise certain discretions with respect to
the Notes and the Swap Agreement (and, by extension, each of the Credit Default Swap Transactions
thereunder).
Determinations
For example, the Calculation Agent is responsible for:
(i)
determining whether an Auction would apply for the purposes of the Credit Event;
(ii)
where there are multiple Auctions held concurrently, determining the Auction which will apply to
the Credit Default Swap Transactions;
(iii)
where the Credit Suisse Cash Settlement Amount is not determined by an Auction, determining the
Credit Suisse Cash Settlement Amount on the basis of bid quotations from third party dealers (in
which context the Calculation Agent will be entitled to select the cheapest eligible obligation for
valuation);
(iv)
notwithstanding publication by ISDA of a resolution of a CDDC, determining successor Reference
Entities for the purposes of the Credit Default Swap Transactions;
(v)
determining the value of the obligations selected for determination of the Final Price , for the
purpose of the Credit Default Swap Transactions; and
(vi)
determining whether, under the terms of the Credit Default Swap Transactions (and by extension, the
Notes), certain obligations of the parties would be suspended pending a resolution of a CDDC.
Discretions
The Calculation Agent has the right to:
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(i)
elect whether to deliver a notice and supporting information to trigger an early redemption of the
Notes following the occurrence of a Credit Event (whether or not a CDDC considered the same);
(ii)
(A) select a date for the valuation of the obligations selected for determination of the Final Price and
(B) select third party dealers from which to obtain bid quotations for the purposes of such valuation,
in each case, only in those instances where the Credit Suisse Cash Settlement Amount is not
determined pursuant to an Auction; and
(iii)
select the date on which certain valuations are undertaken to determine the Early Cash Redemption
Amount payable under the Notes.
Noteholders should note that any determination and/or calculation made by the Calculation Agent shall, in
the absence of manifest error, be final and binding on the Issuer and the Noteholders.
Reference Entities and successors
Noteholders are exposed, through the Issue Terms, to the credit risk of four Reference Entities as at the Issue
Date (as described in more detail in the section of this Prospectus entitled “Transaction Description”). The
creditworthiness of a Reference Entity may change over time. If the creditworthiness of any of the Reference
Entities declines, then the market value of the Notes is likely to decline, reflecting an increase in the
perceived likelihood that a Credit Event may occur in relation to any such Reference Entity.
The identity of a Reference Entity, and hence the credit risk associated with the Notes, may change as a
result of a succession or a series of successions (forming part of a plan evidenced by certain eligible
information) in respect of relevant obligations of that Reference Entity, provided that, in the case of a
sovereign Reference Entity, events such as annexation, unification, secession, partition, dissolution,
consolidation, reconstitution or other similar events (referred to in the Credit Derivatives Definitions as a
“Sovereign Succession Event“) resulted in the succession. If ISDA publicly announces that a CDDC has
resolved that a different entity or entities has or have become successor(s) to any such original Reference
Entity, then the identity of the original Reference Entity may be treated as having been amended accordingly
for the purposes of the Notes. The credit risk associated with a successor Reference Entity or Reference
Entities may be different from and could be greater than the credit risk associated with the original Reference
Entity. The legally effective date of an event in which one or more entities become successor(s) to an
original Reference Entity (as determined pursuant to the Credit Derivatives Definitions) is referred to in the
Credit Derivatives Definitions as a “Succession Date”.
The Credit Derivatives Definitions set out detailed rules for the determination of successor Reference
Entities. For Reference Entities which are not sovereigns (as is the case for the Notes), this will involve a
determination, on the basis of certain eligible information, as to the liability which has been assumed by any
potential successor in relation to the outstanding bonds and loans of the relevant Reference Entity. It is
possible that, based on such a determination, a single successor will be identified, or there may be multiple
successors. Each original Reference Entity may itself continue to be a Reference Entity, together with other
successor Reference Entities. If multiple successor Reference Entities are identified, then the Credit Default
Swap Transactions will be amended by the Calculation Agent so as to be treated as having been split into
multiple new transactions, each such transaction referencing one of the relevant successors and each such
new transaction having a Reference Entity Notional Amount equal to the Reference Entity Notional Amount
of the relevant original Reference Entity divided by the number of successors. Accordingly, if such original
Reference Entity has more than one successor Reference Entity as a result of such corporate event, then the
Noteholders will be exposed to the creditworthiness of multiple Reference Entities.
Where “Financial Reference Entity Terms” apply to a Reference Entity, a senior Credit Default Swap
Transaction (as determined in accordance with the terms thereof, being a Credit Default Swap Transaction
for which (a) the Reference Obligation or prior reference obligation is a senior obligation or (b) there is no
Reference Obligation or prior reference obligation) would follow the senior Bond or Loan Obligations of
such Reference Entity, and a subordinated Credit Default Swap Transaction (as determined in accordance
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with the terms thereof, being a Credit Default Swap Transaction for which the Reference Obligation or prior
reference obligation is a subordinated obligation) would follow the subordinated Bond or Loan Obligations
of such Reference Entity (or if there are no such subordinated obligations, the senior Bond or Loan
Obligations).
In determining successors, a CDDC will disregard a succession that occurred more than 90 days prior to the
date of the relevant request to convene the CDDC, except in the case of a Universal Successor for nonsovereign Reference Entities (referred to in the Credit Derivatives Definitions as the “Successor Backstop
Date”). The Calculation Agent is not obliged to make any such request to a CDDC on behalf of the
Noteholders, and Noteholders will have no ability to make such a request solely by virtue of being a
Noteholder. Absent publication by ISDA of a resolution of a CDDC, the Calculation Agent may make, but
will not be obliged to make, a determination as to successor Reference Entities for the purposes of the Credit
Default Swap Transactions and, consequently, the Notes.
The “Universal Successor” exception to the Successor Backstop Date applies to a entity which assumes all
obligations (including at least one relevant Bond or Loan Obligation) of the non-sovereign Reference Entity
in circumstances where such Reference Entity ceases to exist or is in the process of being dissolved and has
not issued or incurred any Borrowed Money obligation since the date of such assumption. Such entity will be
the sole successor to the Reference Entity provided that the Succession Date occurred on or after a single
lookback date of 1 January 2014.
Reference Obligations
For more commonly traded Reference Entities, it is not necessary for a Reference Obligation to be specified
in the Confirmation as the Reference Obligation as, in the absence of a Reference Obligation being specified
in the Confirmation, the Reference Obligation will be the obligation specified as the “Standard Reference
Obligation” for the relevant Reference Entity for the relevant seniority level on a list to be published by
ISDA (referred to in the Credit Derivatives Definitions as the “SRO List”). Whether the Reference
Obligation is a Standard Reference Obligation or otherwise, the specification of a Reference Obligation may
affect the credit risk represented by an investment in the Credit Default Swap Transaction and, consequently,
the Notes. Firstly, a Reference Obligation under a credit default swap will be capable of being an
“Obligation” or “Deliverable Obligation” (see below “Obligations” and “Deliverable Obligations”)
regardless of whether such Reference Obligation otherwise meets the stipulated parameters. Secondly, the
Reference Obligation will be taken into account as a benchmark for the purposes of the application of the
“Not Subordinated” Deliverable Obligation Characteristic (see below “Obligation Characteristics”).
The following relates to substitution of “Non-Standard Reference Obligations” and references to Reference
Obligation in the remainder of this paragraph should be construed accordingly. In certain circumstances – for
example, where the specified Reference Obligation (i) is redeemed in whole; or (ii) is affected by a reduction
by redemption or otherwise in the aggregate amounts due under the Reference Obligation to below USD
10,000,000 (or equivalent); or (iii) ceases to be an obligation of the Reference Entity for any reason other
than the occurrence of a Credit Event (each such event a “Substitution Event”) – the Credit Derivatives
Definitions provide for determination of a substitute Reference Obligation. Any such substitute Reference
Obligation is required, amongst other things, to satisfy a number of criteria including the requirement that,
where the original Reference Obligation satisfied the Deliverable Obligation Category and Characteristics
when issued and immediately prior to the Substitution Event, the Substitute Reference Obligation must also
satisfy such Deliverable Obligation Category and Characteristics. If ISDA publicly announces that a CDDC
has resolved to treat a different obligation or obligations as a substitute or substitutes for the original
Reference Obligation or Reference Obligations, and such resolution would apply to a Credit Default Swap
Transaction, then those substitute reference obligations that are identified by the relevant CDDC will replace
one or more Reference Obligations. Absent publication by ISDA of a resolution of a CDDC, the Calculation
Agent may make a determination as to any substitute Reference Obligation for the purposes of the Credit
Default Swap Transaction. The Calculation Agent will notify the Noteholders of any such substitute
Reference Obligation.
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Event Determination Date and Notice Delivery Period
Where the relevant transaction is subject to settlement by reference to an Auction (see below), an Event
Determination Date will occur if there is a public announcement by ISDA that a CDDC has resolved that a
Credit Event has occurred, with effect from the date on which the relevant request was made to convene the
CDDC (referred to as the “Credit Event Resolution Request Date”) and provided that (i) the Credit Event
in question occurred no earlier than 60 days before such request date (referred to as the “Credit Event
Backstop Date”), (ii) the date of such request fell within a specified period (referred to as the “Notice
Delivery Period”) and (iii) (in the case of an M(M)R Restructuring Credit Event only), that one or other of
the relevant parties has elected to trigger settlement of the transaction in question.
The Credit Event Backstop Date may be prior to the Trade Date and therefore a Credit Event may have
occurred prior to the “Trade Date” specified with respect to any Note. Noteholders should conduct their own
review of any recent developments with respect to a Reference Entity by consulting publicly available
information. If a request to convene a CDDC has been delivered prior to the Trade Date to determine
whether a Credit Event has occurred with respect to a Reference Entity, details of such request may be found
free of charge on the ISDA website at www.isda.org/credit. Even if a CDDC has not been convened to
determine such matter as of the Trade Date, a CDDC may still be convened after the Trade Date in respect of
an event which occurs up to 60 calendar days before the date of a request to convene such CDDC.
The Notice Delivery Period in relation to Credit Default Swap Transaction is the period during which a
Credit Event may be triggered with respect to the relevant Reference Entity. The Notice Delivery Period will
commence on the “Trade Date” of a Credit Default Swap Transaction (as specified in the Pricing
Supplement) and will expire on the date that is 14 calendar days after the Scheduled Termination Date of a
Credit Default Swap Transaction.
However, in certain circumstances, the Notice Delivery Period may be extended beyond the date falling 14
calendar days after the Scheduled Termination Date of a Credit Default Swap Transaction, if a potential
Credit Event, such as a Failure to Pay (only if “Grace Period Extension” is specified as applicable or where
relevant in the Confirmation) or Repudiation/Moratorium (only if such event is an applicable Credit Event),
has occurred prior to the Scheduled Termination Date, which may become actual Credit Events within a
specified period following the Scheduled Termination Date.
Credit Events and related terms
Settlement of a credit derivative, including the Credit Default Swap Transactions (and, by extension, a
redemption of the Notes), is contingent on the occurrence of a Credit Event. The Credit Events which are
applicable for the purposes of a particular Reference Entity may vary from Reference Entity to Reference
Entity, and will be determined by reference to the Settlement Matrix. The selection of Credit Events as
applicable or not applicable will materially affect the credit risk to which Noteholders are exposed.
The Credit Derivatives Definitions provide for a number of Credit Events, with the following applying to the
Credit Default Swap Transactions and the Notes:
Bankruptcy
“Bankruptcy” includes where a Reference Entity:
(i)
is dissolved (other than where this is as a result of such Reference Entity merging or
otherwise combining with another entity);
(ii)
becomes insolvent or is unable to pay its debts as they become due or admits its inability to
do so;
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(iii)
makes a general assignment, arrangement, scheme or composition with or for the benefit of
its creditors generally, or such a general assignment, arrangement, scheme or composition
becomes effective;
(iv)
institutes, or has instituted against it, a proceeding seeking a judgment of insolvency or
bankruptcy or any other similar relief under any bankruptcy or insolvency law or other law
affecting creditors’ rights, or a petition is presented for its winding-up or liquidation, and
such proceeding or petition results in a judgment of insolvency or bankruptcy or is not
dismissed within 30 calendar days of such institution;
(v)
has a resolution passed for its winding-up or liquidation (other than pursuant to a
consolidation, amalgamation or merger);
(vi)
seeks or becomes subject to the appointment of an administrator or equivalent official for it
or for all or substantially all of its assets; or
(vii)
has a secured party take possession of all or substantially all of its assets, or such assets are
subject to attachment by a creditor.
Failure to Pay
A “Failure to Pay” will occur where a Reference Entity fails to make, when and where due and after
the expiration of any applicable time period (a “Grace Period”) during which such failure may be
cured by such Reference Entity (and after the satisfaction of any conditions precedent to such Grace
Period), any payments in an aggregate amount of not less than a specified amount under one or more
Obligations (as defined below) in accordance with the terms of such Obligations at the time of such
failure. The Grace Period, if any, will be as set out in the terms of the Obligation; if no such Grace
Period is specified, a minimum Grace Period will be assumed to apply.
Restructuring
“Restructuring” is, generally speaking, a process whereby a company or a sovereign entity facing
cash flow problems or which is otherwise in financial distress, renegotiates its debts. A
“Restructuring” for the purposes of the Credit Derivative Definitions will, subject to certain
exemptions occur if:
(i)
any of the following events occurs in relation to a particular obligation of a Reference Entity
(save in respect of a Reference Entity that is a US Reference Entity);
(A)
a reduction in the rate or amount of interest payable or the amount of scheduled
interest accruals;
(B)
a reduction in the amount of principal or premium payable;
(C)
a postponement or other deferral of a date or dates for payment or accrual of
interest, or the payment of principal or premium;
(D)
a change in the ranking in priority of payment of such obligation resulting in the
such obligation becoming subordinated in its right to receive payment to one or
more other obligations; or
(E)
a redenomination of an obligation (other than to certain permitted currencies, and
excluding a redenomination into Euro where the relevant currency jurisdiction joins
the Eurozone); and
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(ii)
such event occurs in a form which binds all of the holders of that obligation, is agreed
between the Reference Entity or a governmental authority and a sufficient number of holders
of such obligation to bind all holders of the obligation (including, in each case, in respect of
Bonds only, by way of an exchange) and where such event is not expressly provided for
under the original terms of that obligation; and
(iii)
any such event results from a deterioration in the creditworthiness or financial condition of
the relevant Reference Entity.
If a Bond exchange has occurred, the determination as to whether one of the events described under
sub-paragraphs (i)(A) to (E) above has occurred will be based on a comparison of the terms of the
Bond immediately prior to such exchange and the terms of the resulting obligations immediately
following such exchange. Unless “Multiple Holder Obligation” is specified as not applicable in
relation to a particular Reference Entity in the Confirmation, a Restructuring will have occurred only
if the event in question relates to an Obligation held by more than three non-affiliated holders and,
where, for Obligations other than bonds, the consent of at least two-thirds of the holders of the
relevant Obligation is required.
Limitations may apply as to the eligible obligations which may be taken into account for credit
derivatives auction or, where applicable, delivered in settlement of a credit default swap.
Restructuring Maturity Limitation and Fully Transferable Obligations (“Mod R”)
If “Mod R” applies in accordance with the Confirmation, then in order to be taken into account for
settlement an obligation must be a "Fully Transferable Obligation" - that is, capable of being
assigned or novated without consent. It must also be possible to transfer the obligation to a bank or
financial institution or other entity which regularly makes, purchases or invests in loans or other
financial assets. The maturity of such obligation must fall within specified limits.
Modified Restructuring Maturity Limitation and Conditionally Transferable Obligations (“Mod
Mod R”)
If “Mod Mod R” applies in accordance with the Confirmation, then in order to be taken into account
for settlement an obligation must be a “Conditionally Transferable Obligation” that is, capable of
being assigned or novated with consent, provided that such consent must not be unreasonably
withheld. Again, the maturity of such obligation must fall within specified limits.
Governmental Intervention
A “Governmental Intervention” will occur where, as a result of the action taken or announcement
made by a governmental authority pursuant to, or by means of, a restructuring and resolution law or
regulation (or any other similar law or regulations) applicable to the relevant Reference Entity,
certain binding changes are made to the relevant obligations of the Reference Entity. These changes
include, without limitation, a reduction in the rate or amount (as applicable) of interest, principal or
premium payable when due, a postponement or other deferral of the date or dates for payment of
interest, principal or premium, a change in the ranking in priority of payment of any obligation, or a
mandatory cancellation, conversion or exchange.
Unlike a “Restructuring”, “Governmental Intervention” is not subject to the requirement for a
deterioration in creditworthiness or financial condition of the Reference Entity or to the "Multiple
Holder Obligation" requirement, and applies regardless of whether the relevant event is expressly
provided for under the terms of the Obligation (for example, debt with bail-in provisions).
Note that a Credit Event will occur regardless of whether it occurs due to (for example) the relevant
Reference Entity not being authorised to incur the relevant obligation, the illegality or unenforceability of
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any obligation, applicable law or regulation or an order of a court or tribunal or any exchange controls or
capital requirements being imposed.
Obligations
The occurrence of a Credit Event such as a Failure to Pay, Restructuring and Governmental Intervention will
be determined by reference to eligible obligations of the relevant Reference Entity, referred to as
“Obligations”, which may be loans, bonds or other obligations issued directly by such Reference Entity or
obligations in respect of which such Reference Entity acts as guarantor. Obligations are defined by reference
to the “Obligation Category” and “Obligation Characteristics” (if any) specified for each Credit Default
Swap Transaction. The applicable Obligation Category and Obligation Characteristics will vary from one
Reference Entity to another, according to the trading terms which apply as set out in the Confirmation.
Certain Obligations may be excluded from the determination as to whether or not a Credit Event has
occurred (such Obligations, “Excluded Obligations”). Where “Financial Reference Entity Terms” applies to
a Credit Default Swap Transaction and with respect to the determination of whether a Governmental
Intervention or Restructuring has occurred: (a) any subordinated obligation shall be an Excluded Obligation,
if the Credit Default Swap Transaction is specified to be a “Senior Transaction”; and (b) any obligation
subordinated to the obligation in (a) shall be an Excluded Obligation, if a Credit Default Swap Transaction is
specified to be a “Subordinated Transaction”.
Obligation Categories
The Obligation Category for the Credit Default Swap Transactions and, consequently, the Notes, is
Borrowed Money (on the basis of the standard terms contained in the “European Corporate”, “North
American Corporate” or “Asia Corporate” (as applicable) Settlement Matrix, which applies in respect of
each of the Credit Default Swap Transactions).
“Borrowed Money” includes bonds and loans (except for an undrawn revolving credit facility) and deposits,
but excludes repos where a security is repurchased at a higher price, the difference being equivalent to a
finance charge. It also includes deposits and disbursements under letters of credit.
Obligations Characteristics
No Obligation Characteristics are specified for any of the Credit Default Swap Transactions and,
consequently, the Notes (on the basis of the standard terms contained in the “European Corporate”, “North
American Corporate” or “Asia Corporate” (as applicable) Settlement Matrix, which applies in respect of
each of the Credit Default Swap Transactions).
Auction Settlement
When a Credit Event occurs in respect of a Reference Entity that is referenced in a significant number of
credit derivative transactions, a CDDC may resolve that an Auction should be held to facilitate settlement of
credit default swap transactions referencing such Reference Entity at the same time and at a fixed settlement
price. The price determined through an Auction is referred to as an “Auction Final Price“. Where an
Auction is held for such Reference Entity and the Calculation Agent determines that the “Deliverable
Obligations” (see below) would be substantially the same as the provisions in the relevant Credit Default
Swap Transaction for selecting the obligations for determination of the Final Price, the related Auction Final
Price may be used to determine the Early Cash Redemption Amount that will be paid to Noteholders.
During the Auction process credit derivatives dealers participating in the Auction submit prices at which
they would buy and sell the eligible obligations of the relevant Reference Entity, together with requests to
buy or sell such obligations received from their customers.
As of the date hereof, the Swap Counterparty (and certain of its affiliates) is a leading dealer in the credit
derivatives market. There is a high probability that the Swap Counterparty or its affiliates will act as a
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participating bidder in any Auction held with respect to a Reference Entity. In such capacity, the Swap
Counterparty or its affiliates may take certain actions which may influence the Auction Final Price including,
amongst other things, providing rates of conversion to determine the Auction currency rate and submitting
bids and offers on behalf of itself or its customers. In deciding whether to take any such action (or whether to
act as a participating bidder in any Auction), the Swap Counterparty or its affiliates will not be required to,
and will not, consider the interests of the Noteholders. A Noteholder has no right, solely by virtue of being
an investor in the Notes, to submit a bid or offer in an Auction.
If an Auction is held in respect of a Reference Entity it is expected that the relevant Auction will occur three
business days immediately before the 30th calendar day after which the relevant CDDC received the request
to determine whether a Credit Event has occurred with respect to such Reference Entity. However, the
CDDC may decide that an Auction in respect of a Reference Entity should take place quicker than normal,
for example, to ensure that quicker than normal settlement of relevant obligations occurs before any
proposed bond exchange. Alternatively, the Auction process may be substantially delayed, for example
because the CDDC determines that there is insufficient information available to it to establish auction terms.
In such case, the payment of the Early Cash Redemption Amount to the Noteholders may also be
substantially delayed.
The expected timeline is illustrated in the diagram below which is indicative only and may be expanded or
compressed by resolution of a specified majority of the relevant CDDC.
Expected Auction Timeline for credit default swaps
30 calendar days minus 3 Business Days **
Auction Settlement Date
Maximum
4040
hours
Maximum
hours
10
days
10calendar
calendar
days
Credit Derivatives
Determinations Committee
considers question
Convene Credit
Derivatives
Convene
Credit
Derivatives
Determinations Committee*
X Business
Days***
3 Business
Days
Maturity Date
Auction Date
Auction Resolution
Publication of
Draft Auction Settlement Terms
ISDA, as secretary,
determines relevant
Transaction Type
Publication of Final List
Eligible market participant requests
meeting in writing, endorsed by a voting member
of the Credit Derivatives Determinations Committee
of Deliverable Obligations
Credit
Event
Deliverable Obligations
An Auction will be conducted in relation to eligible obligations of the relevant Reference Entity, referred to
as “Deliverable Obligations”. Deliverable Obligations will be identified by the CDDC. Members of the
relevant CDDC may propose obligations which they consider to be eligible for inclusion in an initial list to
be published. Subsequently, market participants may propose additional obligations for inclusion in such list,
or challenge the eligibility of obligations already on such list, prior to publication of a final list of such
Deliverable Obligations. In certain circumstances, following the occurrence of particular Credit Events, a
specific asset package will be deliverable into the Auction. Noteholders will not have the ability to propose
obligations for inclusion in the list of Deliverable Obligations, or to challenge the eligibility of Deliverable
Obligations which are included on such list.
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The Deliverable Obligation Category for each of the Credit Default Swap Transactions is “Bond or Loan”
(on the basis of the standard terms contained in the “European Corporate”, “North American Corporate” or
“Asia Corporate” (as applicable) Settlement Matrix, which applies in respect of each of the Credit Default
Swap Transactions). Other possible Deliverable Obligation Categories that may apply to credit derivatives in
general in relation to the relevant Reference Entity (only one of which may apply at any time) are
“Payment”, “Borrowed Money”, “Reference Obligations Only”, “Bond” or “Loan”.
The Deliverable Obligation Characteristics are “Not Subordinated”, “Specified Currency”, “Assignable
Loan”, “Consent Required Loan”, “Transferable”, “Maximum Maturity” (30 years), and “Not Bearer”. Other
possible Deliverable Obligation Characteristics that may apply to credit derivatives in general in relation to
the relevant Reference Entity (one or more of which may apply at any time) are “Not Sovereign Lender”,
“Not Domestic Currency”, “Not Domestic Issuance”, “Not Domestic Law”, “Listed”, “Direct Loan
Participation” and “Accelerated or Matured”. Certain of such characteristics will be applicable only to
Obligations which are bonds (“Listed”, “Not Bearer”), which are not loans (“Transferable”) or which are
loans (“Assignable Loan, Consent Required Loan”, “Direct Loan Participation”). In the case of “Assignable
Loan”, “Consent Required Loan” and “Direct Loan Participation” the relevant Deliverable Obligation is
required to satisfy one only of such characteristics.
“Accelerated or Matured” means an Obligation which on or prior to the date on which it is to be delivered in
an Auction it is due to mature and due to be repaid, or as a result of downgrade/bankruptcy is due to be
repaid as a result of an acceleration clause.
“Assignable Loan” means a Loan is capable of being assigned or novated to a different bank or financial
institution as lender without the consent of the Reference Entity or guarantor, if any, of such Loan or any
agent for the Loan.
“Bond” includes any obligation of a type included in the “Borrowed Money” Obligation Category that is in
the form of, or represented by, a bond, note (other than notes delivered pursuant to Loans), certificated debt
security or other debt security but does not include any other type of Borrowed Money.
“Bond or Loan” means any Obligation which is either a Bond or a Loan.
“Consent Required Loan” means a Loan that may be assigned or novated only with the consent of the
relevant Reference Entity or guarantor, if any of such Loan or any agent for the Loan.
“Direct Loan Participation” means a Loan with a participation agreement whereby the buyer is capable of
creating, or procuring the creation of, a contractual right in favour of the seller that provides the seller with
recourse to the participation seller for a specified share in any payments due under the relevant loan which
are received by the participation seller.
“Listed” means an obligations which is quoted, listed or ordinarily purchased and sold on an exchange.
“Loan” includes any term loan agreement, revolving loan agreement or other similar credit agreement but
does not include any other type of “Borrowed Money” obligation.
“Maximum Maturity” means that the Obligation must have a maximum maturity which is no longer than the
period specified in the Confirmation.
“Not Bearer” means that an obligation must not be in the form of a bearer instrument unless it is held and
traded within Euroclear, Clearstream or another internationally recognised clearing system. A bearer
instrument is an instrument that is payable on demand to the holder of the instrument, i.e. the entity or person
physically possessing the instrument is deemed to be the owner and ownership is passed by physical delivery
of the instrument.
139
“Not Domestic Currency” means any obligation that is payable in any currency other than the domestic
currency as specified in the Settlement Matrix or Confirmation. If the currency is not specified, the domestic
currency shall be that of the Reference Entity if it is a sovereign, or that of the country in which the
Reference Entity is organised if it is not a sovereign.
“Not Domestic Issuance” means any obligation except any obligation that was, at the time it was issued or
incurred, intended to be offered for sale primarily in the domestic market of the Reference Entity. Any
obligation that is registered or qualified for sale outside the domestic market of the Reference Entity
(regardless of whether such obligation is also registered or qualified for sale within the domestic market of
the relevant Reference Entity) satisfies this characteristic.
“Not Domestic Law” means any obligation that is not governed by the laws of the relevant Reference Entity,
if such Reference Entity is a Sovereign, or the jurisdiction of organisation of the relevant Reference Entity, if
such Reference Entity is not a Sovereign.
“Not Sovereign Lender” means any obligation that is not primarily owed to a sovereign or supra-national
organisation.
“Not Subordinated” means that the obligation which can trigger a credit event must rank equal or higher in
the Reference Entity’s capital structure than the most senior Reference Obligation of the Reference Entity in
terms of priority of payment. If no Reference Obligation is specified, then “Not Subordinated” refers to any
of the Reference Entity’s senior “Borrowed Money” obligations.
“Specified Currency” means an obligation that is payable in the currency or currencies specified in the
Confirmation or, if no currency is so specified, any of the lawful currencies of Canada, Japan, Switzerland,
the United Kingdom, the United States of America and the Euro and any successor currency to any such
currencies.
“Transferable” means an Obligation that is transferable to institutional investors without any contractual,
statutory or regulatory restrictions.
Deliverable Obligations may be indirect obligations of the relevant Reference Entity by way of an eligible
guarantee. If the Confirmation specifies that “All Guarantees” applies to a particular Reference Entity (as is
the case in respect of each of the Credit Default Swap Transactions on the basis of the standard terms
contained in the “European Corporate”, “North American Corporate” or “Asia Corporate” (as applicable)
Settlement Matrix, which applies in respect of each Credit Default Swap Transaction (other than in respect
of the US Reference Entity)), then an eligible guarantee will be any irrevocable guarantee of the Reference
Entity of all amounts due to be paid by the relevant underlying obligor, subject to exceptions e.g. where the
arrangement is structured as surety bond or letter of credit, or where the terms of the arrangement provide for
the reduction or discharge or assignment of the obligations of the guarantor.
Where “Financial Reference Entity Terms” and “Governmental Intervention” apply in respect of a Reference
Entity and (i) there is a Governmental Intervention Credit Event; or (ii) a Restructuring Credit Event in
respect of the Reference Obligation where such Restructuring does not constitute a Governmental
Intervention, then a related asset package resulting from a prior deliverable obligation may also be
deliverable. The asset package would be treated as having the same outstanding principal as the
corresponding prior deliverable obligation or package observable bond. This applies even if the resulting
asset package is deemed to be zero where there are no resulting assets, and, in such case, the buyer of credit
protection would receive a 100 per cent.
If “All Guarantees” is not specified as applicable in the Confirmation, then eligible guarantees will only be
those provided by a parent company in respect of a subsidiary (broadly speaking, a subsidiary is an where
another company (the “parent company”) owns more than 50 per cent. of the shares or other interests with
the power to elect the board of directors or any other similar body).
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Auction Settlement following an M(M)R Restructuring Credit Event
In relation to certain categories of Reference Entity and a Restructuring Credit Event, limitations on the
maturity of eligible obligations to be taken into account for the purposes of the related Auction(s) will apply.
Such limitations will apply to a Reference Entity if either “Restructuring Maturity Limitation and Fully
Transferable Obligation” (often abbreviated to “Modified Restructuring” or “Mod R”) or “Modified
Restructuring Maturity Limitation and Conditionally Transferable Obligation (often referred to as “Modified
Modified Restructuring” or “Mod Mod R” as explained above) is expressed to be applicable to that
Reference Entity in accordance with the Confirmation.
In cases where settlement of a credit default swap is triggered by the buyer and Mod R (being market
standard for credit default swaps referencing North American corporate reference entities to which
Restructuring is applicable) or Mod Mod R (being market standard for European corporate entities) is
applicable, any obligation which such buyer wishes to deliver to the seller must not only constitute a
Deliverable Obligation but must also satisfy additional requirements as to transferability (for Mod R, being a
Fully Transferable Obligation and for Mod Mod R being a Conditionally Transferable Obligation as
explained under “Restructuring” above) and as to its final maturity date (as explained under “Restructuring”
above).
Where Mod R or Mod Mod R applies, several concurrent but separate Auctions may occur with respect to
such Reference Entity, as determined by the relevant CDDC, with each such Auction relating to credit
default swaps with maturities falling within stipulated periods (so-called “maturity buckets”) following the
occurrence of the effective date of the event giving rise to the relevant Restructuring Credit Event. In
general, market practice is such that a total of eight separate maturity buckets might apply in respect of a
Reference Entity with respect to which a Restructuring has occurred and in respect of which Mod R is
applicable. Where a Restructuring has occurred with respect to a Reference Entity and Mod Mod R applies,
there are only four separate buckets which might apply with the latest maturity bucket being the 10 year
bucket mentioned below. The first seven such maturity buckets (noting, as mentioned above, that only the
first four maturity buckets apply where Mod Mod R is applied) will each encompass a maturity period that
ends, respectively, on the first of March 20, June 20, September 20 or December 20 to occur on or
immediately following the date that is 2.5 years, 5 years, 7.5 years, 10 years, 12.5 years, 15 years or 20 years
following the date of the Restructuring; and the eighth maturity bucket will encompass a maturity period
ending after 20 years following the date of the Restructuring (each such ending date referred to as a
“Maturity Bucket End Date”). Where settlement of a credit default swap is triggered by the buyer, as a
general rule, credit default swaps will be assigned to the maturity bucket with the Maturity Bucket End Date
that occurs on or immediately following the scheduled termination date of such credit default swap.
An Auction will only be held in relation to any particular maturity bucket if there is a sufficient volume of
credit default swaps with maturities falling within that period. Failing that, no Auction will be held in
relation to such bucket, and each party to a standard credit default swap transaction will have the ability to
(but will not have to) give a notice requiring that the Auction Final Price be determined based on the Auction
conducted in relation to an alternative maturity bucket.
Where the buyer of credit protection gives such a notice, the relevant Auction used to determine the Auction
Final Price will be the Auction for which a more limited number of obligations of the relevant Reference
Entity are eligible or, where there are a number of such Auctions, the Auction with the widest range of such
obligations (that is, the Auction corresponding to the next-shortest dated maturity bucket, which would tend
to result in a higher Auction Final Price and hence a lower credit loss). Where the relevant notice is given by
the credit protection seller, the relevant Auction will be the Auction with the widest range of eligible
obligations (that is the Auction corresponding to the longest-dated maturity bucket, which would tend to
result in a lower Auction Final Price and hence a greater loss). If both parties deliver such a notice, then the
credit protection buyer’s notice will prevail.
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DESCRIPTION OF THE EQUITY SWAPS
Equity Swaps
Equity swap transactions are usually derivative transactions entered into between two parties to create a right
for the parties to receive payments that match or track the performance of one or more shares or share
indices. In respect of the Notes, the Equity Swap Transactions are bespoke transactions, the final exchange
amount receivable by the Issuer under which will determine any Additional Payout Amounts payable in
respect of each Class of Notes. Such final exchange amount is referred to in this section as the Swap
Counterparty Equity Final Exchange Amount.
The Equity Swap Transaction relating to the Class A Notes references the performance of a basket of share
indices and the Equity Swap Transaction relating to the Class B Notes references the performance of a
basket of shares. Whether any Swap Counterparty Equity Final Exchange Amount shall be receivable by the
Issuer under each Equity Swap Transaction, and accordingly whether any Additional Payout Amount shall
be payable in respect of the relevant Class, will depend in part on the relative performance of the
corresponding basket of share indices or shares.
The Swap Counterparty Equity Final Exchange Amount is subject to a floor of zero. As a result, if the
relative performance of a basket of share indices or shares calculated under an Equity Swap Transaction
decreases, this will simply result in no Swap Counterparty Equity Final Exchange Amount being receivable
by the Issuer under the Equity Swap Transaction, and therefore no Additional Payout Amount being payable
in respect of the Class of Notes to which such Equity Swap Transaction relates.
A description of the Equity Swap Transactions, including of the amounts potentially receivable by the Issuer
thereunder and the related definitions, is set out in the section of this Prospectus entitled “Transaction
Description” under the heading “Impact of the Equity Swap Transactions on the Notes”.
Baskets of shares
Equity Index Basket
The Swap Counterparty Equity Final Exchange Amount (if any) payable to the Issuer under the Class A
Equity Swap Transaction (and, accordingly, the Additional Payout Amount (if any) in respect of the Class A
Notes) will depend on the performance of the Equity Index Basket, which on the Issue Date consists of the
following basket of shares:
i
Indexi
Bloomberg Code
Weighting
1
Taiwan Taiex Index
TWSE Index
1/3
2
MSCI Singapore Free Index
SIMSCI Index
1/3
3
Hang Seng Index
HSI Index
1/3
Equity Basket
The Swap Counterparty Equity Final Exchange Amount (if any) payable to the Issuer under the Class B
Equity Swap Transaction (and, accordingly, the Additional Payout Amount (if any) in respect of the Class B
Notes) will depend on the performance of the Equity Basket, which on the Issue Date consists of the
following basket of shares:
i
Sharei
Bloomberg Code
Exchange
1
Zurich Insurance Group AG
ZURN VX Equity
SIX Swiss Exchange
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2
Swedbank AB – A Shares
SWEDA SS Equity
Stockholm Stock Exchange
3
Royal Dutch Shell PLC – A SHS
RDSA LN Equity
London Stock Exchange
4
TeliaSonera AB
TLSN SS Equity
Stockholm Stock Exchange
5
Swiss Re AG
SREN VX Equity
SIX Swiss Exchange
6
TELE2 AB – B SHS
TEL2B SS Equity
Stockholm Stock Exchange
7
BP PLC
BP/LN Equity
London Stock Exchange
8
Novartis AG - REG
NOVN VX Equity
SIX Swiss Exchange
9
Nestle SA - REG
NESN VX Equity
SIX Swiss Exchange
10
Nordea Bank AB
NDA SS Equity
Stockholm Stock Exchange
Payments under the Equity Swap Transactions
The Swap Counterparty Equity Final Exchange Amount in respect of each Equity Swap Transaction will be
determined by reference to a formula. A description of the formula is set out in the section of this Prospectus
entitled “Transaction Description” under the heading “Formula for calculating the Swap Counterparty
Equity Exchange Amount and the Additional Payout Amount”.
In mathematical terms:
(a) the Swap Counterparty Equity Final Exchange Amount in respect of the Class A Equity Swap
Transaction will be an amount in SEK payable by the Swap Counterparty and determined by the
Calculation Agent in accordance with the following formula:
Swap Notional Amount x Participation x Max{0, Equity Return} x FX Factor – Performance Fee
(b) the Swap Counterparty Equity Final Exchange Amount in respect of the Class B Equity Swap
Transaction will be an amount in SEK payable by the Swap Counterparty and determined by the
Calculation Agent in accordance with the following formula:
Swap Notional Amount x Participation x Max{0, Equity Return} – Performance Fee
where:
“Averaging Dates” means the 18th calendar day of each March, June, September and December from, and
including, 18 June 2019 to, and including, 18 December 2020, subject to adjustments to account for certain
disruptions in respect of the relevant Indexi or Sharei.
“Equity Return” means:
(a)
in respect of the Class A Equity Swap Transaction, the return (expressed as a percentage) calculated
as:
3

i 1
 Final Leveli


 100% Wi 
 Initial Level

t


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(b)
in respect of the Class B Equity Swap Transaction, the return (expressed as a percentage) calculated
as:
“EUR” means euro.
“Fee Calculation Factor” means, for the purpose of calculating any Swap Counterparty Equity Final
Exchange Amount, 94.60%.
“Fee Multiplier” means, in respect of:
(i)
the Class A Notes, a percentage rate equal to (a) (X) the product of the Participation, the Equity
Return and the FX Factor (each as defined in, and determined pursuant to, the terms of the Class A
Equity Swap Transaction); plus (Y) 100%; multiplied by (Z) the relevant Fee Calculation Factor;
minus (b) 100%; and
(ii)
the Class B Notes, a percentage rate equal to (a) (X) the product of the Participation and the Equity
Return (each as defined in, and determined pursuant, to the terms of the Class B Equity Swap
Transaction); plus (Y) 100%; multiplied by (Z) the relevant Fee Calculation Factor; minus (b) 100%,
provided that in each case, the Fee Multiplier shall be subject to a minimum of zero.
“Fee Rate” means, in respect of a Class of Notes, 10%.
“Final Leveli” means:
(a)
in respect of the Class A Equity Swap Transaction, the arithmetic mean of the official closing level
of Indexi on each Averaging Date, as determined by the Calculation Agent; and
(b)
in respect of the Class B Equity Swap Transaction, the arithmetic mean of the official closing price
of Sharei on each Averaging Date, as determined by the Calculation Agent.
“FX Business Day” means a day on which commercial banks are open for business (including dealings in
foreign exchange in accordance with the practice of a foreign exchange market) in the principal financial
centre of the Settlement Currency (as defined under the relevant Equity Swap Transaction) and a day on
which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET2) System or
any successor thereto is operating.
“FX Factor” is calculated as:
“FX Rate0” means the FX Rate in respect of the Initial Rate Calculation Date, as determined by the
Calculation Agent.
“FX RateT” means the FX Rate in respect of the Rate Calculation Date, as determined by the Calculation
Agent.
“FX Rate” means, in respect of the Class A Equity Swap Transaction, (i) the daily fixing rate of exchange of
the number of SEK per EUR 1 divided by (ii) the daily fixing rate of exchange of the number of USD per
EUR 1, rounded to four decimal places, each such rate as published on Reuters page ECB37 at 14:15 CET,
144
or such successor page or rate, or if any such rate or page is not available, such other rate as selected or
determined by the Calculation Agent.
The FX Rate will be subject to corrections, if any, as a result of information subsequently displayed by the
source within one hour of the time when such rate is first displayed by such source, unless the Calculation
Agent determines in its discretion, acting in good faith and in a commercially reasonable manner, that it is
not practicable to take into account such correction.
“i” means:
(a)
in respect of the Class A Equity Swap Transaction, a unique integer from one (1) to three (3), each
representing an individual Index, as specified in the table applicable to the Class A Equity Swap
Transaction above; and
(b)
in respect of the Class B Equity Swap Transaction, a unique integer from one (1) to ten (10), each
representing an individual Share, as specified in the table applicable to the Class B Equity Swap
Transaction above.
“Initial Leveli” means:
(a)
in respect of the Class A Equity Swap Transaction, the official closing price of Indexi on the Initial
Setting Date, as determined by the Calculation Agent; and
(b)
in in respect of the Class B Equity Swap Transaction, the official closing level of Sharei on the
Initial Setting Date, as determined by the Calculation Agent.
“Initial Rate Calculation Date” means the FX Business Day immediately preceding the Initial Setting Date,
as determined by the Calculation Agent.
“Initial Setting Date” means 27 November 2014.
“Max” means, when followed by a series of amounts (or values) inside brackets, whichever is the greater of
the amounts (or values) separated by a comma inside those brackets.
“Participation” means:
(a)
in respect of the Class A Equity Swap Transaction, a percentage between 70% and 100%; and
(b)
in respect of the Class B Equity Swap Transaction, a percentage between 100% and 150%,
in each case as determined by the Issuer or the Calculation Agent on or about the Issue Date.
“Performance Fee” means, in respect of each Class of Notes, an amount determined in accordance with the
following formula:
Performance Fee = Outstanding Principal Amount of such Class on the Issue Date x Fee Rate
x Fee Multiplier (as defined in, and determined pursuant to, the terms of the Equity Swap
Transaction relating to such Class)
For the purpose of calculating the Performance Fee, the Outstanding Principal Amount of the relevant Class
on the Issue Date shall be reduced from time to time as a result of any purchase and cancellation of Notes of
such Class pursuant to Master Conditions 8(n) and 8(o).
“Rate Calculation Date” means the FX Business Day immediately following the latest occurring Averaging
Date for any Share, as determined by the Calculation Agent.
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“Swap Notional Amount” means:
(a)
in respect of the Class A Equity Swap Transaction, the product of (i) an amount in SEK equal to the
Outstanding Principal Amount of the Class A Notes as at the Issue Date and (ii) the relevant Fee
Calculation Factor; and
(b)
in respect of the Class B Equity Swap Transaction, the product of (i) an amount in SEK equal to the
Outstanding Principal Amount of the Class B Notes as at the Issue Date and (ii) the relevant Fee
Calculation Factor,
in each case, subject to reduction at any time and from time to time as a result of any purchase and
cancellation of Notes of that Class pursuant to Master Conditions 8(n) (Purchases) and 8(o) (Cancellation).
“USD” means United States Dollars.
“Wi” means, in respect of the Class A Equity Swap Transaction, the weighting of Indexi as specified in the
table under the heading “Equity Index Basket” above.
The Swap Counterparty Equity Final Exchange Amount, if any, in respect to each Equity Swap Transaction
will be paid to the Issuer on the Reference Business Day immediately preceding the Scheduled Maturity
Date.
Adjustments and disruptions
In respect of the Class A Equity Swap Transaction, certain adjustments may be made to the closing levels of
any of the constituent indices of the Equity Index Basket and the dates on which such levels are determined
for the purposes of the Class A Equity Swap Transaction as a result of the occurrence of (i) non-Scheduled
Trading Days and Disrupted Days, (ii) Market Disruption Events or (iii) a correction of a published level in
respect of an index. In respect of the Class B Equity Swap Transaction, certain adjustments may be made to
the closing levels of any of the constituent shares of the Equity Basket and the dates on which such levels are
determined for the purposes of the relevant Equity Swap Transaction as a result of the occurrence of: (i) nonScheduled Trading Days and Disrupted Days; (ii) Market Disruption Events; (iii) Potential Adjustment
Events or; (v) a correction of a published price in respect of a share. Any adjustment or disruption due the
occurrence of any such event may delay any Averaging Dates.
Pursuant to the terms of each of:
(a)
the Class A Equity Swap Transaction, Index Adjustment Events in respect of the indices referenced
in the Equity Index Basket (including an Index Modification, Index Cancellation and Index
Disruption) may occur; and
(b)
the Class B Equity Swap Transaction, Extraordinary Events in respect of the shares referenced in the
Equity Basket (including Merger Events, Tender Offers, De-listing, Nationalization and Insolvency),
as well as certain Potential Adjustment Events, may occur.
On the occurrence of one of these events in relation to a share or an index, the affected Equity Swap
Transaction may be terminated, or the Calculation Agent under the Swap Agreement may:
(a)
select a new underlying share, which will be deemed to be one of the shares in the basket in place of
the share, and make adjustments to the terms of the relevant Equity Swap Transaction to account for
the economic effect of the event and/or the replacement of the share. Any replacement share will, to
the extent practicable, be selected from the same economic sector, have shares denominated in the
same currency and have a similar market capitalisation to the relevant replaced share; or
(b)
(i) make adjustments to terms of the relevant Equity Swap Transaction to account for the economic
effect of the event and determine the effective date of that adjustment, or (ii) if the Calculation Agent
determines that no adjustment that it could make under (i) will produce a commercially reasonable
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result, notify the parties that the relevant consequence shall be the termination of such Equity Swap
Transaction, in which case such Equity Swap Transaction will be terminated,
in each case, in accordance with the terms of the relevant Equity Swap Transaction.
The Equity Swap Transactions may also be subject to adjustment or early termination upon the occurrence of
certain Additional Disruption Events, including:
(a)
in respect of the Class A Equity Swap Transaction, a Change in Law, Hedging Disruption and
Increased Cost of Hedging; and
(b)
in respect of the Class B Equity Swap Equity Swap Transaction, a Change in Law, Insolvency Filing,
Hedging Disruption and Increased Cost of Hedging.
If the Calculation Agent determines that an Additional Disruption Event has occurred, the Calculation Agent
may determine:
(a)
the appropriate adjustment, if any, to be made to any one or more of the terms of the Equity Swap
Transaction, including without limitation, any variable or term relevant to settlement or payment
under the Equity Swap Transaction, as the Calculation Agent determines appropriate to account for
the economic effect of such Additional Disruption Event, as applicable, on the Equity Swap
Transaction, and determine the effective date of that adjustment; or
(b)
that no adjustments to the terms of the Equity Swap Transaction would achieve a commercially
reasonable result, and determine that the Equity Swap Transaction shall be terminated.
The termination of each Equity Swap Transaction will trigger the termination of the corresponding Credit
Default Swap Transaction and an early redemption of the Class of Notes to which it relates.
For the avoidance of doubt, where the Calculation Agent is required to act or make a determination under the
Swap Agreement, it will be its own decision and will do so in good faith and in a commercially reasonable
manner.
These adjustment and disruption events (and the related definitions) are summarised below, and certain risks
in respect of such events are set out in the section of this Prospectus entitled “Risk Factors”. Prospective
investors must refer to the terms of the relevant Equity Swap Transaction and the Equity Derivatives
Definitions incorporated therein by reference for the full meaning and effect of these events.
Exchange and Related Exchange: In respect of a Sharei or Indexi, the exchange or quotation system
specified as such in or determined in accordance with the terms of the relevant Credit Default Swap
Transaction.
Non-Scheduled Trading Days: If any Averaging Date in relation to any share or index is not a Scheduled
Trading Day, such date will be the next following Scheduled Trading Day. A Scheduled Trading Day is one
on which each Exchange or Related Exchange are scheduled to be open for trading for their respective
regular trading sessions.
Disrupted Days: A Disrupted Day is a Scheduled Trading Day on which a relevant Exchange or any Related
Exchange fails to open for trading during its regular trading session or on which a Market Disruption Event
has occurred.
If any Averaging Date is a Disrupted Day, the Averaging Date for each share or index in the basket not
affected by the occurrence of a Disrupted Day shall not change, but the Averaging Date for any share or
index that is affected by the occurrence of a Disrupted Day shall be the next Scheduled Trading Day that is
not a Disrupted Day and on which another Averaging Date does not or is not deemed to occur (such date
being a “Valid Date”) in relation to such share or index. If the first Valid Date in respect of the share or
index has not occurred in eight Scheduled Trading Days following the original date, that eighth Scheduled
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Trading Day will be deemed to be the Averaging Date and the Calculation Agent will determine the relevant
level for that Averaging Date.
Market Disruption Events: Market Disruption Events include: (a) any suspension of or limitation imposed
on trading by the relevant Exchange or Related Exchange or otherwise and whether by reason of movements
in price exceeding limits permitted by the relevant Exchange or Related Exchange or otherwise (i) relating to
the share on the Exchange (or, where applicable, relating to securities that comprise 20 percent or more of
the level of the relevant index), or (ii) in futures or options contracts relating to the share or index on any
relevant Related Exchange; and (b) any event (other than an early closure) that disrupts or impairs the ability
of market participants in general (i) to effect transactions in, or obtain market values for, the relevant shares
on the Exchange (or, where applicable, securities that comprise 20 percent or more of the level of the
relevant index), or (ii) to effect transactions in, or obtain market values for, futures or options contracts
relating to the share or index on any relevant Related Exchange.
Potential Adjustment Events: Following a Potential Adjustment Event, the Calculation Agent will
determine whether it has a diluting or concentrative effect on the theoretical value of the relevant shares and,
if so, will (i) make the adjustments, if any, to any one or more of the variables relevant to the terms of the
relevant Equity Swap Transaction to account for that diluting or concentrative effect and (ii) determine the
effective date of the adjustment.
Potential Adjustment Events include, but are not limited to: (i) certain subdivisions, consolidations or
reclassifications of relevant shares; (ii) free distributions or dividends of any such shares to existing holders;
(iii) extraordinary dividends; (iv) calls by an issuer in respect of shares that are not fully paid; (v) a
repurchase of shares by the issuer; (vi) events affecting shareholders’ rights; and (vii) any other event that
may have a diluting or concentrative effect on the theoretical value of the relevant shares.
Extraordinary Events: Extraordinary Events include a Merger Event, Tender Offer, Nationalization,
Delisting or Insolvency.
Merger Event: A Merger Event includes, but is not limited to: (i) transfer of or an irrevocable commitment
to transfer all of such shares outstanding to another entity or person; (ii) consolidation, amalgamation,
merger or binding share exchange into another entity or person; (iii) takeover offer, tender offer, exchange
offer, solicitation, proposal or other event by any entity or person to purchase or otherwise obtain l00% of
the outstanding shares of the issuer; or (iv) consolidation, amalgamation, merger or binding share exchange
of the issuer or its subsidiaries with or into another entity in which the issuer is the continuing entity and
which does not result in a reclassification or change of all such shares outstanding, but results in the shares
before the event representing less than 50% of the shares immediately following such event.
Tender Offer: A Tender Offer includes, but is not limited to, a takeover offer, tender offer, exchange offer,
solicitation, proposal or other event by any entity or person that results in such entity or person purchasing,
or otherwise obtaining or having the right to obtain, by conversion or other means, greater than 10% and less
than 100% of the outstanding voting shares of the issuer of the shares, as determined by the Calculation
Agent.
Nationalization: Nationalization occurs when all the shares or all or substantially all the assets of an issuer
of relevant shares are nationalised, expropriated or are otherwise required to be transferred to any
governmental agency, authority or entity.
Delisting: Delisting occurs when an Exchange announces that pursuant to the rules of such Exchange, the
shares will cease to be listed, traded or publicly quoted on the Exchange for any reason and are not
immediately re-listed, re-traded or re-quoted on an exchange or quotation system located in the same country
as the Exchange (or, where the Exchange is within the European Union, in any member state of the European
Union).
Insolvency: Insolvency means that by reason of the voluntary or involuntary liquidation, bankruptcy,
insolvency, dissolution or winding-up of or any analogous proceeding affecting an issuer, (i) all the shares of
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that issuer are required to be transferred to a trustee, liquidator or other similar official or (ii) holders of the
shares of that issuer become legally prohibited from transferring them.
Index Disruption Events: If (i) on or prior to any valuation date a relevant index sponsor announces that it
will make a material change in the formula for or the method of calculating that index or in any other way
materially modifies that index (other than a modification prescribed in that formula or method to maintain
that index in the event of changes in constituent stock and capitalisation and other routine events) (an “Index
Modification”) or permanently cancels the index and no successor index exists (an “Index Cancellation”)
or (ii) on any valuation date the index sponsor fails to calculate and announce a relevant index (an “Index
Disruption” and, together with an Index Modification and an Index Cancellation, each an “Index
Adjustment Event”).
Correction of a published Share Price and Index Level: In the event that any price or level published on
the Exchange which is used for any calculation or determination made under the Equity Swap Transactions
is subsequently corrected and the correction is published after the original publication by the Exchange
within the period it would usually take for settlement of a transaction in the shares to occur under the rules of
the Exchange, the Swap Counterparty may notify the parties of that correction in which case the Calculation
Agent will determine the amount that is payable or deliverable as a result of that correction, and, to the
extent necessary, will adjust the terms of such Equity Swap Transaction to account for such correction.
Correction of a published FX Rate: The FX Rate will be subject to corrections, if any, to information
subsequently displayed by the source within one hour of the time when such rate is first displayed by such
source, unless the Calculation Agent determines in its discretion, acting in good faith and in a commercially
reasonable manner, that it is not practicable to take into account such correction.
Additional Disruption Events: Change in Law, Insolvency Filing, Hedging Disruption and Increased Cost
of Hedging, as applicable.
Change in Law: On or after the Trade Date due to the adoption of or any change in any applicable law or
regulation (including, without limitation, any tax law), or due to the promulgation of or any change in the
interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law
or regulation (including any action taken by a taxing authority), the Calculation Agent determines (following
receipt of a request from either party for such a determination) in good faith that (i) it has become illegal for
a party to the Equity Swap Transaction to hold, acquire or dispose of hedge positions relating to such
transaction, or (ii) it will incur a materially increased cost in performing its obligations under such
transaction (including, without limitation, due to any increase in tax liability, decrease in tax benefit or other
adverse effect on its tax position) provided that this event shall not apply if the Calculation Agent determines
that such party could have taken reasonable steps to avoid such illegality.
Insolvency Filing: The share issuer institutes or has instituted against it by a regulator, supervisor or any
similar official with primary insolvency, rehabilitative or regulatory jurisdiction over it in the jurisdiction of
its incorporation or organisation or the jurisdiction of its head or home office, or it consents to a proceeding
seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law
or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation by
it or such regulator, supervisor or similar official or it consents to such a petition, provided that proceedings
instituted or petitions presented by creditors and not consented to by the share issuer shall not be deemed an
insolvency filing.
Hedging Disruption: The Swap Counterparty is unable, after using commercially reasonable efforts, to (i)
acquire, establish, re-establish, substitute, maintain, unwind or dispose of any transaction(s) or asset(s) it
deems necessary to hedge the equity price risk of entering into and performing its obligations with respect to
the relevant transaction, or (ii) realise, recover or remit the proceeds of any such transaction(s) or asset(s).
Increased Cost of Hedging: The Swap Counterparty would incur a materially increased (as compared with
circumstances existing on the Trade Date) amount of tax, duty, expense or fee (other than brokerage
commissions) to (i) acquire, establish, re-establish, substitute, maintain, unwind or dispose of any
149
transaction(s) or asset(s) it deems necessary to hedge the equity price risk of entering into and performing its
obligations with respect to the relevant transaction, or (ii) realize, recover or remit the proceeds of any such
transaction(s) or asset(s), provided that any such materially increased amount that is incurred solely due to
the deterioration of the creditworthiness of the Swap Counterparty shall not be deemed an Increased Cost of
Hedging.
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INDEX DISCLAIMERS
HANG SENG INDEX
The Hang Seng Index (the “Index”) is published and compiled by Hang Seng Indexes Company Limited
pursuant to a licence from Hang Seng Data Services Limited. The mark(s) and name(s) the Hang Seng
Index are proprietary to Hang Seng Data Services Limited. Hang Seng Indexes Company Limited and Hang
Seng Data Services Limited have agreed to the use of, and reference to, the Index in connection with the
Notes, BUT NEITHER HANG SENG INDEXES COMPANY LIMITED NOR HANG SENG DATA
SERVICES LIMITED WARRANTS OR REPRESENTS OR GUARANTEES TO ANY BROKER OR
HOLDER OF THE NOTES OR ANY OTHER PERSON (i) THE ACCURACY OR COMPLETENESS OF
THE INDEX AND ITS COMPUTATION OR ANY INFORMATION RELATED THERETO; OR (ii) THE
FITNESS OR SUITABILITY FOR ANY PURPOSE OF THE INDEX OR ANY COMPONENT OR DATA
COMPRISED IN IT; OR (iii) THE RESULTS WHICH MAY BE OBTAINED BY ANY PERSON FROM
THE USE OF THE INDEX OR ANY COMPONENT OR DATA COMPRISED IN IT FOR ANY
PURPOSE, AND NO WARRANTY OR REPRESENTATION OR GUARANTEE OF ANY KIND
WHATSOEVER RELATING TO THE INDEX IS GIVEN OR MAY BE IMPLIED. The process and basis
of computation and compilation of the Index and any of the related formula or formulae, constituent stocks
and factors may at any time be changed or altered by Hang Seng Indexes Company Limited without
notice. TO THE EXTENT PERMITTED BY APPLICABLE LAW, NO RESPONSIBILITY OR
LIABILITY IS ACCEPTED BY HANG SENG INDEXES COMPANY LIMITED OR HANG SENG
DATA SERVICES LIMITED (i) IN RESPECT OF THE USE OF AND/OR REFERENCE TO THE INDEX
IN CONNECTION WITH THE NOTES; OR (ii) FOR ANY INACCURACIES, OMISSIONS, MISTAKES
OR ERRORS OF HANG SENG INDEXES COMPANY LIMITED IN THE COMPUTATION OF THE
INDEX; OR (iii) FOR ANY INACCURACIES, OMISSIONS, MISTAKES, ERRORS OR
INCOMPLETENESS OF ANY INFORMATION USED IN CONNECTION WITH THE COMPUTATION
OF THE INDEX WHICH IS SUPPLIED BY ANY OTHER PERSON; OR (iv) FOR ANY ECONOMIC OR
OTHER LOSS WHICH MAY BE DIRECTLY OR INDIRECTLY SUSTAINED BY ANY BROKER OR
HOLDER OF THE NOTES OR ANY OTHER PERSON DEALING WITH THE NOTES AS A RESULT
OF ANY OF THE AFORESAID, AND NO CLAIMS, ACTIONS OR LEGAL PROCEEDINGS MAY BE
BROUGHT AGAINST HANG SENG INDEXES COMPANY LIMITED AND/OR HANG SENG DATA
SERVICES LIMITED in connection with the Notes in any manner whatsoever by any broker, holder or
other person dealing with the Notes. Any broker, holder or other person dealing with the Notes does so
therefore in full knowledge of this disclaimer and can place no reliance whatsoever on Hang Seng Indexes
Company Limited and Hang Seng Data Services Limited. For the avoidance of doubt, this disclaimer does
not create any contractual or quasi-contractual relationship between any broker, holder or other person and
Hang Seng Indexes Company Limited and/or Hang Seng Data Services Limited and must not be construed to
have created such relationship.
TWSE INDEX
TAIEX, TAIWAN STOCK EXCHANGE CAPITALIZATION WEIGHTED STOCK INDEX, IS THE
REGISTERED SERVICE/TRADEMARK OWNED BY, AND PROPRIETARY TO TAIWAN STOCK
EXCHANGE CORPORATION (“TWSE”). ANY UNAUTHORIZED USE OF TAIEX IS STRICTLY
PROHIBITED. ALL INFORMATION PROVIDED IS FOR INFORMATION PURPOSES ONLY AND
NO WARRANTY IS MADE AS TO ITS FITNESS FOR PURPOSE, SATISFACTORY QUALITY OR
OTHERWISE. EVERY EFFORT HAS BEEN MADE TO ENSURE THAT ALL INFORMATION GIVEN
IS ACCURATE, BUT NO RESPONSIBILITY OR LIABILITY (INCLUDING IN NEGLIGENCE) CAN
BE ACCEPTED BY TWSE FOR ERRORS OR OMISSIONS OR FOR ANY LOSSES ARISING FROM
THE USE OF THIS INFORMATION
MSCI SINGAPORE FREE INDEX (THE "SIMSCI INDEX")
THE NOTES ARE NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY MORGAN STANLEY
CAPITAL INTERNATIONAL INC. ("MSCI"), ANY AFFILIATE OF MSCI OR ANY OTHER PARTY
INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI INDEX. THE MSCI
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INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES ARE
SERVICE MARK(S) OF MSCI OR ITS AFFILIATES AND HAVE BEEN LICENSED FOR USE FOR
CERTAIN PURPOSES BY THE ISSUER. NEITHER MSCI, ANY OF ITS AFFILIATES NOR ANY
OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI INDEX
MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO THE OWNERS OF
THE NOTES OR ANY MEMBER OF THE PUBLIC REGARDING THE ADVISABILITY OF
INVESTING IN FINANCIAL NOTES GENERALLY OR IN THE NOTES PARTICULARLY OR THE
ABILITY OF ANY MSCI INDEX TO TRACK CORRESPONDING STOCK MARKET PERFORMANCE.
MSCI OR ITS AFFILIATES ARE THE LICENSORS OF CERTAIN TRADEMARKS, SERVICE MARKS
AND TRADE NAMES AND OF THE MSCI INDEXES WHICH ARE DETERMINED, COMPOSED
AND CALCULATED BY MSCI WITHOUT REGARD TO THE NOTES OR THE ISSUER OR OWNER
OF THE NOTES.
NEITHER MSCI, ANY OF ITS AFFILIATES NOR ANY OTHER PARTY INVOLVED IN, OR
RELATED TO, MAKING OR COMPILING ANY MSCI INDEX HAS ANY OBLIGATION TO TAKE
THE NEEDS OF THE ISSUERS OR OWNERS OF THE NOTES INTO CONSIDERATION IN
DETERMINING, COMPOSING OR CALCULATING THE MSCI INDEXES. NEITHER MSCI, ITS
AFFILIATES NOR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR
COMPILING ANY MSCI INDEX IS RESPONSIBLE FOR OR HAS PARTICIPATED IN THE
DETERMINATION OF THE TIMING OF, PRICES AT, OR QUANTITIES OF THE NOTES TO BE
ISSUED OR IN THE DETERMINATION OR CALCULATION OF THE EQUATION BY WHICH THE
NOTES ARE REDEEMABLE FOR CASH. NEITHER MSCI, ANY OF ITS AFFILIATES NOR ANY
OTHER PARTY INVOLVED IN, OR RELATED TO, THE MAKING OR COMPILING ANY MSCI
INDEX HAS ANY OBLIGATION OR LIABILITY TO THE OWNERS OF THE NOTES IN
CONNECTION WITH THE ADMINISTRATION, MARKETING OR OFFERING OF THE NOTES.
ALTHOUGH MSCI SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE
CALCULATION OF THE MSCI INDEXES FROM SOURCES WHICH MSCI CONSIDERS RELIABLE,
NEITHER MSCI, ANY OF ITS AFFILIATES NOR ANY OTHER PARTY INVOLVED IN, OR
RELATED TO MAKING OR COMPILING ANY MSCI INDEX WARRANTS OR GUARANTEES THE
ORIGINALITY, ACCURACY AND/OR THE COMPLETENESS OF ANY MSCI INDEX OR ANY
DATA INCLUDED THEREIN. NEITHER MSCI, ANY OF ITS AFFILIATES NOR ANY OTHER
PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI INDEX MAKES
ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ISSUER,
THE ISSUER'S CUSTOMERS OR COUNTERPARTIES, ISSUERS OF FINANCIAL NOTES, OWNERS
OF FINANCIAL NOTES, OR ANY OTHER PERSON OR ENTITY, FROM THE USE OF ANY MSCI
INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED
HEREUNDER OR FOR ANY OTHER USE. NEITHER MSCI, ANY OF ITS AFFILIATES NOR ANY
OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI INDEX
SHALL HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS OR INTERRUPTIONS OF OR IN
CONNECTION WITH ANY MSCI INDEX OR ANY DATA INCLUDED THEREIN.
FURTHER, NEITHER MSCI, ANY OF ITS AFFILIATES NOR ANY OTHER PARTY INVOLVED IN,
OR RELATED TO, MAKING OR COMPILING ANY MSCI INDEX MAKES ANY EXPRESS OR
IMPLIED WARRANTIES OF ANY KIND, AND MSCI, ANY OF ITS AFFILIATES AND ANY OTHER
PARTY INVOLVED IN, OR RELATED TO MAKING OR COMPILING ANY MSCI INDEX HEREBY
EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, WITH RESPECT TO ANY MSCI INDEX AND ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MSCI, ANY OF
ITS AFFILIATES OR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR
COMPILING ANY MSCI INDEX HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL,
PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN
IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
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DESCRIPTION OF CREDIT SUISSE INTERNATIONAL
Credit Suisse International (which undertakes various roles in respect of the Notes, including acting as Swap
Counterparty as at the Issue Date) (“CSi”) was incorporated in England and Wales under the Companies Act
1985, on 9 May 1990, with registered no. 2500199 and was re-registered as an unlimited company under the
name “Credit Suisse Financial Products” on 6 July 1990, and was renamed Credit Suisse First Boston
International on 27 March 2000 and Credit Suisse International on 16 January 2006. Its registered office and
principal place of business is at One Cabot Square, London E14 4QJ, telephone number +44 (0)20 7888
8888. CSi is an English bank and is regulated as an EU credit institution by the Financial Conduct Authority
(“FCA”) and the Prudential Regulation Authority (“PRA”) under the Financial Services Act 2012. The PRA
has issued a scope of permission notice authorising CSi to carry out specified regulated investment activities.
CSi is an unlimited company and, as such, its shareholders have a joint, several and unlimited obligation to
meet any insufficiency in the assets of CSi in the event of its liquidation. The joint, several and unlimited
liability of the shareholders of CSi to meet any insufficiency in the assets of CSi will only apply upon
liquidation of CSi. Therefore, prior to any liquidation of CSi, the creditors may only have recourse to the
assets of CSi and not to those of its shareholders.
CSi commenced business on 16 July 1990. Its principal business is banking, including the trading of
derivative products linked to interest rates, foreign exchange, equities, commodities and credit. The primary
objective of CSi is to provide comprehensive treasury and risk management derivative product services. CSi
has established a significant presence in global derivative markets through offering a full range of derivative
products and continues to develop new products in response to the needs of its customers and changes in
underlying markets. The business is managed as a part of the Investment Banking Division of Credit Suisse
AG in the Europe, Middle East and Africa region, and is supported by Credit Suisse AG’s Shared Services
Division, which provides business support services in such areas as finance, legal, compliance, risk
management, and information technology.
CSi has been issued a senior long-term debt rating of “A (Stable Outlook)” by Fitch and a senior long-term
debt rating of “A1 (Negative Outlook)” by Moody’s.
CSi has debt securities listed and admitted to trading on the Luxembourg Stock Exchange and the Irish Stock
Exchange, amongst others.
153
DESCRIPTION OF THE REFERENCE ENTITIES
PART A: The Goldman Sachs Group Inc.
The following information in this section has been extracted from the base prospectus of Goldman Sachs
Group, Inc. dated 24 June 2013, as supplemented and amended from time to time (the “Goldman Sachs
Group, Inc. Prospectus”) and is subject to and qualified entirely by the Goldman Sachs Group, Inc. Base
Prospectus.
Goldman Sachs Group, Inc. (“Goldman Sachs”) is established under the laws of the State of Delaware with
its registered office at 200 West Street, New York, New York 10282, USA. Goldman Sachs is a leading
global investment banking, securities and investment management firm that provides a wide range of
financial services to a substantial and diversified client base that includes corporations, financial institutions,
governments and high-net-worth individuals.
Its activities are conducted in the following segments:
Investment Banking. Investment Banking is comprised of:
- Financial Advisory, which includes advisory assignments with respect to mergers and acquisitions,
divestitures, corporate defence activities, risk management, restructurings and spin-offs; and
- Underwriting, which includes public offerings and private placements of a wide range of securities, loans
and other financial instruments, and derivative transactions directly related to these client underwriting
activities.
Institutional Client Services. Institutional Client Services is comprised of:
- Fixed Income, Currency and Commodities, which includes client execution activities related to making
markets in interest rate products, credit products, mortgages, currencies and commodities; and
- Equities, which includes client execution activities related to making markets in equity products, as well as
commissions and fees from executing and clearing institutional client transactions on major stock, options
and futures exchanges worldwide. Equities also includes Goldman Sachs’ securities services business, which
provides financing, securities lending and other prime brokerage services to institutional clients, including
hedge funds, mutual funds, pension funds and foundations, and generates revenues primarily in the form of
interest rate spreads or fees, and revenues related to our insurance activities.
- Investing and Lending which includes Goldman Sachs’ investing activities and the origination of loans to
provide financing to clients. These investments and loans are typically longer-term in nature. Goldman Sachs
makes investments, directly and indirectly through funds that Goldman Sachs manage, in debt securities,
loans, public and private equity securities, real estate, consolidated investment entities and power generation
facilities.
- Investment Management which provides investment management services and offering investment products
(primarily through separately managed accounts and commingled vehicles, such as mutual funds and private
investment funds) across all major asset classes to a diverse set of institutional and individual clients.
Investment Management also offers wealth advisory services, including portfolio management and financial
counselling, and brokerage and other transaction services to high-net-worth individuals and families.
At the date of this Prospectus and as stated on Bloomberg page GS:US, Goldman Sachs has securities listed
on the New York Stock Exchange (www.nyse.com). Goldman Sachs may also have securities listed on other
exchanges.
154
PART B: The Royal Bank of Scotland plc
The following information in this section has been extracted from the registration document of The Royal
Bank of Scotland plc dated 7 March 2014, as supplemented and amended from time to time (the “Royal
Bank of Scotland plc Registration Document”) and is subject to and qualified entirely by The Royal Bank
of Scotland plc Registration Document.
The Royal Bank of Scotland plc (“RBS”), originally incorporated under Scots law on 31 October 1984, is a
public limited company incorporated in Scotland with registration number SC090312 and its registered
office at 36 St Andrew Square, Edinburgh EH2 2YB. RBS is a wholly-owned subsidiary of the Royal Bank
of Scotland Group plc (“RBSG”) (RBSG together with its subsidiaries consolidated in accordance with
International Financial Reporting Standards, the “Group”).
RBSG is the holding company of a large global banking and financial services group. Headquartered in
Edinburgh, the Group operates in the United Kingdom, the United States and internationally through its
principal subsidiaries, RBS and National Westminster Bank Plc (“NatWest”). Both RBS and NatWest are
major United Kingdom clearing banks. Globally, the Group has a diversified customer base and provides a
wide range of products and services to personal, commercial and large corporate and institutional customers.
At the date of this Prospectus and as stated on Bloomberg page RBS Corp, RBS has securities listed on the
regulated market of the London Stock Exchange (www.londonstockexchange.com) and the Irish Stock
Exchange (www.ise.ie). RBS may also have securities listed on other exchanges.
155
PART C: The Bank of China Limited
The following has been taken from the Offering Circular of The Bank of China Limited dated
6 December 2013 and as amended from time to time and is subject to and qualified by such Offering
Circular.
The Bank of China Limited (the “Bank”) is one of the four largest commercial banks in the People’s
Republic of China (“PRC”) in terms of total assets with the most extensive international branch network
among PRC commercial banks. The Bank has also been listed by the Financial Stability Board as one of the
global systemically important financial institutions since 2011.
The Bank provides a comprehensive range of financial services to customers across mainland China, Hong
Kong, Macau, Taiwan and 37 overseas countries. The Bank’s scope of business encompasses three main
areas, namely commercial banking, investment banking and insurance. Commercial banking is the Bank’s
traditional core business. It includes corporate banking, personal banking and financial market business
(mainly treasury operations). The combination of commercial banking, investment banking and insurance
businesses has created a universal banking platform that allows the Bank to provide integrated services to its
customers.
The Bank was incorporated as a joint stock company in the PRC on 26 August 2004. The Bank is
headquartered in Beijing with operations in mainland China, Hong Kong, Macau, Taiwan and 37 overseas
countries. The Group’s operating profits were RMB168,128 million, RMB186,767 million and RMB109,900
million for the years ended 31 December 2011 and 2012 and for the six months ended 30 June 2013,
respectively. For the year ended 31 December 2012, the Group’s corporate banking, personal banking,
treasury operations and investment banking and insurance lines of business before inter-segment elimination
accounted for 55.75 per cent., 21.00 per cent., 19.82 per cent. and 1.06 per cent. of its profit before tax,
respectively. For the six months ended 30 June 2013, the Group’s corporate banking, personal banking,
treasury operations and investment banking and insurance lines of business before inter-segment elimination
accounted for 53.88 per cent., 20.83 per cent., 21.28 per cent. and 1.64 per cent. of its profit before tax,
respectively.
At the date of this Prospectus and as stated on Bloomberg page 3988 HK, The Bank of China Limited has
securities listed on the Shanghai Stock Exchange, Hong Kong Stock Exchange and Dusseldorf Stock
Exchange, amongst other exchanges.
156
PART D: Société Générale S.A.
The following information in this section has been extracted from the base prospectus of Société Générale
S.A. dated 29 April 2013, as supplemented and amended from time to time (the “Société Générale S.A.
Base Prospectus”) and is subject to and qualified entirely by the Société Générale S.A. Base Prospectus.
Société Générale S.A. (“Société Générale”), was originally incorporated on May 4, 1864 as a joint-stock
company and authorized as a bank. It is currently registered in France as a French limited liability company
(société anonyme). Société Générale was nationalized along with other major French commercial banks in
1945. In July 1987, Société Générale was privatized through share offerings in France and abroad. Société
Générale is governed by Articles L.210-1 et seq. of the French Commercial Code (Code de commerce) as a
French public limited company and by other rules and regulations applicable to credit institutions and
investment service providers.
Société Générale is registered in the French Commercial Register (Registre du commerce et des sociétés)
under no. 552 120 222 R.C.S. Paris. Société Générale’s head office is 29, boulevard Haussmann, 75009
Paris, France. Its administrative offices are at Tour Societe Generale, 17 Cours Valmy, 92972 Paris-La
Défense, France. Its telephone number is +33 (0)1 42 14 20 00.
Société Générale’s shares are listed on the regulated market of NYSE Euronext in Paris (deferred settlement
market, continuous trading group A, share code 13080). They are also traded in the United States under an
American Depositary Receipt (ADR) program.
The Société Générale Group is an international banking and financial services group based in France. It
includes numerous French and foreign banking and non-banking companies.
The Société Générale Group is organized into five divisions: French Networks, International Retail Banking,
Specialized Finance Services & Insurance, Global Investment Management and Services, and Corporate and
Investment Banking.
The Société Générale Group is engaged in a broad range of banking and financial services activities,
including retail banking, deposit taking, lending and leasing, asset management, securities brokerage
services, investment banking, capital markets activities and foreign exchange transactions. The Group also
holds (for investment) minority interests in certain industrial and commercial companies. The Group’s
customers are served by its extensive network of domestic and international branches, agencies and other
offices in 77 foreign countries. The Société Générale Group has had operations in the United States since
1940 and maintains banking offices in New York, Chicago, Dallas and Houston. The Société Générale
Group also conducts asset management, brokerage, corporate and investment banking, and private banking
activities in the United States through a number of subsidiaries.
At the date of this Prospectus and as stated on Bloomberg page SOCGEN Corp, Société Générale S.A. has
securities listed on the regulated market of the Luxembourg Stock Exchange (www.bourse.lu). Société
Générale S.A. may also have securities listed on other exchanges.
157
DESCRIPTION OF THE REFERENCE OBLIGATIONS
The Reference Obligations with respect to each Credit Default Swap Transaction shall be the obligations
specified as the “Standard Reference Obligation” for each of the Reference Entities for the “Senior Level”
on a list to be published by ISDA. Where there is no such Standard Reference Obligation in respect of each
of the following Reference Entities, the Reference Obligations shall be as follows, to but excluding the first
date of publication of such Standard Reference Obligation, subject to the terms of such Credit Default Swap
Transaction:
In respect of The Goldman Sachs Group, Inc.
USD 3,200,000,000 5.95 per cent. fixed rate notes due 2018 issued by The Goldman Sachs Group, Inc.
(ISIN: US38141GFG47)
In respect of The Bank of China Limited
USD 500,000,000 3.125 per cent. fixed rate notes due 2019 issued by The Bank of China Limited
(ISIN: XS1016655349)
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LUXEMBOURG TAXATION
The following summary is of a general nature only. It is based on the laws presently in force in Luxembourg,
though it is not intended to be, nor should it be construed to be, legal or tax advice. Prospective investors in
the Notes should therefore consult their own professional advisers as to the effects of state, local or foreign
laws, including Luxembourg tax law, to which they may be subject.
Taxation of the Issuer
The Company will be considered a fiscal resident of Luxembourg from a Luxembourg tax law perspective
and should therefore be able to obtain a residence certificate from the Luxembourg tax authorities.
The Company will be liable for Luxembourg corporation taxes. The current standard applicable rate in
Luxembourg city, including corporate income tax (impôt sur le revenu des collectivités), municipal business
tax (impôt commercial communal) and solidarity taxes, is currently 29.22 per cent. Liability for such
corporation taxes extends to the Company’s worldwide profits including capital gains, subject to the
provisions of any relevant double taxation treaty. The taxable income of the Company is computed by
application of all rules of the Luxembourg income tax law of 4 December 1967, as amended (loi concernant
l’impôt sur le revenu), as commented and currently applied by the Luxembourg tax authorities.
Under certain conditions, dividends received by the Company from qualifying participations and capital
gains realised by the Company on the sale of qualifying participations may be exempt from Luxembourg
corporation taxes under the Luxembourg participation exemption. The Company may further deduct from its
taxable profits interest payments made to Noteholders.
A fixed registration duty (droit fixe spécifique d’enregistrement) of EUR75 is payable at the moment of the
amendment of the Articles. The transfer or sale of securities of the Issuer or the Company (as appropriate)
will not be subject to Luxembourg registration or stamp duty.
The Company will be exempt from wealth tax (impôt sur la fortune).
Taxation of the Noteholders
Withholding tax
(i)
Non-resident Noteholders
Under Luxembourg general tax laws currently in force and subject to the laws of 21 June 2005 (the
“Laws”) mentioned below, there is no withholding tax on payments of principal, premium or interest
made to non-resident Noteholders, nor on accrued but unpaid interest in respect of the Notes, nor is
any Luxembourg withholding tax payable upon redemption or repurchase of the Notes held by nonresident Noteholders.
Under the Laws implementing the Council Directive 2003/48/EC of 3 June 2003 on taxation of
savings income in the form of interest payments (the “Savings Directive”) and ratifying the treaties
entered into by Luxembourg and certain dependent and associated territories of EU Member States
(the “Territories”), payments of interest or similar income made or ascribed by a paying agent
established in Luxembourg to or for the immediate benefit of an individual beneficial owner or a
residual entity, as defined by the Laws, which are resident of, or established in, an EU Member State
(other than Luxembourg) or certain Territories will be subject to a withholding tax unless the
relevant recipient has adequately instructed the relevant paying agent to provide details of the
relevant payments of interest or similar income to the fiscal authorities of his/her/its country of
residence or establishment, or, in the case of an individual beneficial owner, has provided a tax
certificate issued by the fiscal authorities of his/her country of residence in the required format to the
relevant paying agent. Where withholding tax is applied, it is currently levied at a rate of 35 per cent.
159
Responsibility for the withholding of the tax will be assumed by the Luxembourg paying agent.
Payments of interest under the Notes are currently subject to withholding tax of 35 per cent.
The Council of the European Union adopted certain amendments to the Savings Directive, which
will, upon implementation, amend or broaden the scope of the requirements described above.
The Luxembourg government has announced its intention to elect out of the withholding system in
favour of an automatic exchange of information with effect as from 1 January 2015.
(ii)
Resident Noteholders
Under Luxembourg general tax laws currently in force and subject to the law of 23 December 2005,
as amended (the “Law”), there is no withholding tax on payments of principal, premium or interest
made to Luxembourg resident Noteholders, nor on accrued but unpaid interest in respect of Notes,
nor is any Luxembourg withholding tax payable upon redemption or repurchase of Notes held by
Luxembourg resident Noteholders.
Under the Law payments of interest or similar income made or ascribed by a paying agent
established in Luxembourg to or for the benefit of an individual beneficial owner who is resident of
Luxembourg will be subject to a withholding tax of 10 per cent.
Responsibility for the withholding of the tax will be assumed by the Luxembourg paying agent.
Payments of interest under the Notes coming within the scope of the Law would be subject to
withholding tax of 10 per cent.
Income Taxation
Noteholders who are residents of Luxembourg will not be liable for any Luxembourg income tax on
repayment of principal.
A Noteholder who is a resident of Luxembourg for tax purposes or who has a permanent establishment or a
fixed place of business in Luxembourg, to which the Notes are attributable, is subject to Luxembourg income
tax in respect of the interest paid or accrued on, or any other income derived from, the Notes. An individual
Luxembourg resident Noteholder, acting in the course of the management of his/her private wealth, is
subject to Luxembourg income tax in respect of interest or any other income received, except if withholding
tax has been levied on such payments in accordance with the Law.
Under Luxembourg domestic tax law, gains realised by an individual Noteholder, who acts in the course of
the management of his private wealth and who is a resident of Luxembourg for tax purposes, on the sale or
disposal, in any form whatsoever, of Notes are not subject to Luxembourg income tax, provided this sale or
disposal took place at least six months after the acquisition of the Notes. An individual Noteholder, who acts
in the course of the management of his private wealth and who is a resident of Luxembourg for tax purposes,
has further to include the portion of the gain corresponding to accrued but unpaid interest in respect of the
Notes in his taxable income, except if (i) withholding tax has been levied on such payments in accordance
with the Law, or (ii) the individual Noteholder has opted for the application of a 10 per cent. tax in full
discharge of income tax in accordance with the Law, which applies if a payment of interest has been made or
ascribed by a paying agent established in an EU Member State (other than Luxembourg), or in a Member
State of the European Economic Area (other than an EU Member State), or in a state that has entered into a
treaty with Luxembourg relating to the Council Directive 2003/48/EC of 3 June 2003.
The withholding tax or self-applied tax are the final tax liability for the Luxembourg individual resident
taxpayers receiving the interest payment in the framework of their private wealth.
Gains realised by a corporate Noteholder or by an individual Noteholder, who acts in the course of the
management of a professional or business undertaking, who is a resident of Luxembourg for tax purposes or
160
who has a permanent establishment or a fixed place of business in Luxembourg, to which the Notes are
attributable, on the sale or disposal, in any form whatsoever, of Notes are subject to Luxembourg income tax.
A Luxembourg Noteholder that is governed by the law of 11 May 2007 on family estate companies, as
amended by the law of 17 December 2010 on undertakings for collective investment, as amended, or by the
law of 13 February 2007 on specialised investment funds, as amended, will not be subject to any
Luxembourg income tax in respect of interest received or accrued on the Notes, or on gains realised on the
sale or disposal, in any form whatsoever, of Notes.
Noteholders will not be deemed to be resident, domiciled or carrying on business in Luxembourg solely by
reason of holding, execution, performance, delivery, exchange and/or enforcement of the Notes.
Gains realised by a non-resident Noteholder, who does not have a permanent establishment or fixed place of
business in Luxembourg, to which the Notes are attributable, on the sale or disposal of Notes are not subject
to Luxembourg income tax.
Wealth tax
A corporate Noteholder, whether it is a resident of Luxembourg for tax purposes or, if not, it maintains a
permanent establishment or a permanent representative in Luxembourg to which such Notes are attributable,
is subject to Luxembourg wealth tax on such Notes, except if the Noteholder is governed by the law of 11
May 2007 on family estate companies, as amended, by the law of 17 December 2010 on undertakings for
collective investment, as amended, by the law of 13 February 2007 on specialised investment funds, as
amended, or is a securitisation company governed by the law of 22 March 2004 on securitisation, as
amended, or a capital company governed by the law of 15 June 2004 on venture capital vehicles, as
amended.
An individual Noteholder, whether he/she is resident of Luxembourg or not, is not subject to Luxembourg
wealth tax on Notes.
Other Taxes
Under present Luxembourg tax law, in the case where a Noteholder is a resident for tax purposes of
Luxembourg at the time of his death, the Notes are included in his taxable estate, for inheritance tax purposes
and gift tax may be due on a gift or donation of Notes, if the gift is recorded in a Luxembourg deed.
161
SWEDISH TAXATION
The following summary outlines certain Swedish tax consequences relating to holders of Notes that are
considered to be Swedish residents for Swedish tax purposes. The summary is based on the laws of
Sweden as effect as at the date of this Prospectus and is intended to provide general information only. The
summary does inter alia not address situations where Notes are held in an investment savings account (Sw.
investeringssparkonto) or the rules regarding reporting obligations for, among others, payers of interest.
Further, the summary does not address credit of foreign taxes. Investors should consult their
professional tax advisors regarding the Swedish tax and other tax consequences (including the
applicability and effect of tax treaties for the avoidance of double taxation) of acquiring, owning and
disposing of Notes in their particular circumstances.
Swedish tax residents
Generally, for Swedish corporations and private individuals (and estates of deceased individuals) with
residence in Sweden for Swedish tax purposes, all capital income (e.g. income that is considered to be
interest for Swedish tax purposes and capital gains on Notes) will be taxable. Specific tax consequences,
however, may be applicable to certain categories of corporations, e.g. life insurance companies. Further,
specific tax consequences may be applicable if, and to the extent that, a holder of Notes realises a capital loss
on the Notes.
If amounts that are considered to be interest for Swedish tax purposes are paid by Euroclear Sweden AB or
by another legal entity domiciled in Sweden, including a Swedish branch, to a private individual (or an
estate of a deceased individual) with residence in Sweden for Swedish tax purposes, Swedish preliminary
taxes are normally withheld by Euroclear Sweden AB or the legal entity on such payments. Swedish
preliminary taxes should normally also be withheld on other returns on securities and receivables (but not
capital gains), if the return is paid out together with such a payment of interest referred to above. Swedish
preliminary taxes are withheld at 30 per cent. less any foreign withholding tax.
162
IRISH TAXATION
The following is a summary based on the laws and practices currently in force in Ireland of Irish
withholding tax on interest and addresses the tax position of investors who are the absolute beneficial
owners of the Notes. Particular rules not discussed below may apply to certain classes of taxpayers
holding Notes, including dealers in securities and trusts. The summary does not constitute tax or legal
advice and the comments below are of a general nature only and it does not discuss all aspects of Irish
taxation that may be relevant to any particular holder of Notes. Prospective investors in the Notes
should consult their professional advisers on the tax implications of the purchase, holding, redemption
or sale of the Notes and the receipt of payments thereon under the laws of their country of residence,
citizenship or domicile.
Withholding Tax
Tax at the standard rate of income tax (currently 20 per cent.) is required to be withheld from payments of
Irish source interest. The Issuer will not be obliged to withhold Irish income tax from payments of interest on
the Notes so long as such payments do not constitute Irish source income. Interest paid on the Notes may be
treated as having an Irish source if:
(a)
the Issuer is resident in Ireland for tax purposes; or
(b)
the Issuer has a branch or permanent establishment in Ireland, the assets or income of which is used
to fund the payments on the Notes; or
(c)
the Issuer is not resident in Ireland for tax purposes but the register for the Notes is maintained in
Ireland or (if the Notes are in bearer form) the Notes are physically held in Ireland.
It is anticipated that, (i) the Issuer is not and will not be resident in Ireland for tax purposes; (ii) the Issuer
will not have a branch or permanent establishment in Ireland; (iii) payments under the Notes will not be
derived from Irish sources or assets; (iv) bearer Notes will not be physically located in Ireland and the Issuer
will not maintain a register of any registered Notes in Ireland.
Encashment Tax
Irish tax will be required to be withheld at the standard rate of income tax (currently 20 per cent.) from
interest on any interest, dividends or annual payments paid on the Notes issued by a company not resident in
Ireland, where such interest, dividends or annual payments are collected or realised by a bank or encashment
agent in Ireland on behalf of any holder of the Notes who is Irish resident.
Encashment tax does not apply where the holder of the Notes is not resident in Ireland and has made a
declaration in the prescribed form to the encashment agent or bank.
European Union Directive on Taxation of Savings Income
Ireland has implemented the EC Council Directive 2003/48/EC on the taxation of savings income into
national law. Accordingly, any Irish paying agent making an interest payment on behalf of the Issuer to an
individual or certain residual entities resident in another Member State of the European Union or certain
associated and dependent territories of a Member State will have to provide details of the payment and
certain details relating to the Noteholder (including the Noteholder’s name and address) to the Irish Revenue
Commissioners who in turn are obliged to provide such information to the competent authorities of the state
or territory of residence of the individual or residual entity concerned.
163
SUBSCRIPTION AND SALE AND TRANSFER RESTRICTIONS
Public Offer Selling Restriction under the Prospectus Directive
In relation to each Member State of the European Economic Area which has implemented the Prospectus
Directive (each, a “Relevant Member State”) and in the Dealer Agreement, the Dealer will represent and
agree that with effect from and including the date on which the Prospectus Directive is implemented in that
Relevant Member State (the “Relevant Implementation Date”) it has not made and will not make an offer
of Notes which are the subject of the offering contemplated by this Prospectus to the public in that Relevant
Member State other than the offers contemplated in the Prospectus in the Kingdom of Sweden from the time
the Prospectus has been approved by the Central Bank of Ireland, being the competent authority in Ireland,
and published and notified to the relevant competent authority in accordance with the Prospectus Directive
as implemented in the Kingdom of Sweden until 20 November 2014, except that it may, with effect from and
including the Relevant Implementation Date, make an offer of Notes to the public in that Relevant Member
State:
(a)
at any time to any legal entity which is a qualified investor as defined in the Prospectus Directive;
(b)
at any time to fewer than 150 natural or legal persons (other than qualified investors as defined in the
Prospectus Directive); or
(c)
at any time in any other circumstances falling within Article 3(2) of the Prospectus Directive,
provided that no such offer of Notes shall require the Issuer or the Dealer to publish a prospectus pursuant to
Article 3 of the Prospectus Directive, or supplement a prospectus pursuant to Article 16 of the Prospectus
Directive.
For the purposes of this provision, the expression an “offer of Notes to the public” in relation to any Notes
in any Relevant Member State means the communication in any form and by any means of sufficient
information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to
purchase or subscribe the Notes, as the same may be varied in that Member State by any measure
implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive”
means Directive 2003/71/EC (as amended by Directive 2010/73/EU) and includes any relevant
implementing measure in each Relevant Member State.
Ireland
Each of Credit Suisse International as Dealer and Garantum Fondkommission AB as Distributor has
represented and agreed that:
(a)
it will not underwrite the issue of, or place the Notes, otherwise than in conformity with the
provisions of the European Communities (Markets in Financial Instruments) Regulations 2007 (Nos.
1 to 3) (as amended), including, without limitation, Regulations 7 and 152 thereof or any codes of
conduct used in connection therewith and the provisions of the Investor Compensation Act 1998;
(b)
it will not underwrite the issue of, or place, the Notes, otherwise than in conformity with the
provisions of the Companies Acts 1963 – 2013 (as amended) of Ireland (as amended), the Central
Bank Acts 1942 - 2012 (as amended) and any codes of conduct rules made under Section 117(1) of
the Central Bank Act 1989; and
(c)
it will not underwrite the issue of, place or otherwise act in Ireland in respect of the Notes, otherwise
than in conformity with the provisions of the Market Abuse (Directive 2003/6/EC) Regulations 2005
(as amended) and any rules issued under Section 34 of the Investment Funds, Companies and
Miscellaneous Provisions Act 2005 by the Central Bank of Ireland.
164
Sweden
Each of the Issuer, Credit Suisse International as Dealer and Garantum Fondkommission AB as Distributor
and any authorised offeror has represented and agreed that the Notes have not been offered or sold and will
not be offered, sold or delivered directly or indirectly in the Kingdom of Sweden by way of public offering,
unless in compliance with the Swedish Financial Instruments Trading Act (Sw. lag (1991:980) om handel
med finansiella instrument), as amended from time to time.
165
Registered office of the Issuer
Argentum Capital S.A.
51 Avenue J.-F. Kennedy
L-1855 Luxembourg
Trustee
Issuing and Paying Agent
Registrar and Transfer Agent
BNY Mellon Corporate Trustee
Services Limited
The Bank of New York Mellon
The Bank of New York Mellon
(Luxembourg) S.A.
One Canada Square
London E14 5AL
United Kingdom
One Canada Square
London E14 5AL
United Kingdom
2-4 rue Eugène Ruppert
Vertigo Building – Polaris
L-2453 Luxembourg
Custodian
Swap Counterparty, Disposal Agent
and Calculation Agent
The Bank of New York Mellon
(Luxembourg) S.A.
Credit Suisse International
One Cabot Square
London E14 4QJ
United Kingdom
2-4 rue Eugène Ruppert
Vertigo Building – Polaris
L-2453 Luxembourg
Arranger and Dealer
Credit Suisse International
One Cabot Square
London E14 4QJ
United Kingdom
Irish Listing Agent
Swedish Agent
Noteholder Facilitator
Skandinaviska Enskilda Banken
AB (publ)
Garantum Fondkommission AB
in the case of Notes admitted to the
Official List
Arthur Cox Listing Services Limited
Earlsfort Centre
Earlsfort Terrace
Dublin 2
Ireland
Norrmalmstorg
Smålandsgatan 16
103 90 Stockholm
Kingdom of Sweden
Kungsträdgårdsgatan 8
106 40 Stockholm
Kingdom of Sweden
Legal Advisers
to Credit Suisse International in respect of English law
to Credit Suisse International in respect of Luxembourg law
Linklaters LLP
Linklaters LLP
One Silk Street
London EC2Y 8HQ
United Kingdom
Avenue John F. Kennedy 35
L-1855 Luxembourg
Grand Duchy of Luxembourg
to Credit Suisse International in respect of Swedish law
Linklaters LLP
Regeringsgatan 67
P.O Box 7833
SE-103 98 Stockholm
Kingdom of Sweden
166
A18797699